The Hindu Business Line : Tuticorin port plans to prepay yen loan

WITH the yen strengthening against the rupee, the Tuticorin Port Trust (TPT) plans to prepay a loan taken from the Japan Bank for International Cooperation (JBIC) in 1999 for funding the capital dredging project at the port.

"The proposal to prepay the principal outstanding on the JBIC loan has already been cleared by the Board of Trustees of the Port Trust and is currently awaiting approval from the Shipping Ministry," official sources said.

The principal outstanding on the JBIC loan is estimated at Rs 252 crore on March 31, 2004 as against the original loan amount of Rs 223 crore. The escalation in the principal loan amount is basically due to variation in foreign exchange, jacking up the effective cost of capital for the Port Trust.

"During the last two years alone, the yen has strengthened by about 16 per cent as against the rupee. With the loan amount remaining the same, TPT will end up paying 16 per cent more. So, all foreign currencies that are strengthening against the rupee must be prepaid quickly," the official stated.

TPT now plans to convert the yen loan into a rupee loan to hedge the foreign exchange risk anticipating a further strengthening of the Japanese yen. The prepayment will be financed through a mix of market borrowings and internal resources.

"For this purpose, IDBI has offered to lend about Rs 200 crore to TPT at 6.5 per cent interest," the official revealed. The TPT will firm up the borrowing plan with IDBI after receiving clearance from the Ministry for pre-paying the yen loan.

The 7,003-million yen loan of JBIC carried an interest rate of 2.3 per cent. Since, the loan was routed through the Union Budget, TPT also has to pay a guarantee fee of 1.2 per cent to the Central Government.

The loan has a maturity period of 20 years plus a seven-year moratorium on repayment of principal amount till 2007. "But, there is no moratorium on prepayment of principal nor is there a penalty for prepayment," the official said.

Since 2000, TPT is collecting a special dredging levy to recover the debt servicing cost of the yen loan availed by it for funding the capital dredging project. Currently, the special charge/rate has been fixed at 30 per cent of the applicable vessel related charges payable by vessels calling at deep draft berths VOC 111 and 1V, Coal Jetty 1 and 11, oil jetty and berth No V111.

The special levy for capital dredging on vessels calling at the container berth No 7 is collected at the rate of 15 per cent of the applicable port dues and pilotage and 30 per cent of the berth hire charges.

The proceeds from the special charge is credited to a separate account maintained for capital dredging and is utilised only towards meeting the debt servicing liability of the yen loan.