The Hindu Business Line : Maersk MD to meet Modi to resolve Pipavav Port takeover tangle

WITH the Gujarat Government putting its foot down on clearing the sale of equity by Sea King Infrastructure Ltd (SKIL) in Gujarat Pipavav Port Ltd (GPPL) to the Maersk A/S Group until SKIL pays up the outstanding dues on a OECF loan, the Managing Director of Maersk India Pvt Ltd, Mr Hans Ole Madsen, is slated to meet the Chief Minister, Mr Narendra Modi, on Tuesday to help resolve the tangle.

Though, Maersk and the Nikhil Gandhi-promoted SKIL had opened an escrow account to settle the dues, a top State Government official told Business Line that the issue remained "unsettled".

"The escrow account was opened to deposit the consideration received by SKIL from Maersk from the stake sale in Pipavav. But, that covers only part settlement of the dues and we are insisting on full settlement for the deal to go through. So, the issue is still unsettled," the official said.

SKIL, the original promoter of GGPL, the company set up to operate and manage Pipavav Port in Gujarat, had sought approval from the Gujarat Maritime Board (GMB) for selling its 37 per cent equity in favour of Maersk. This followed an approval from the Foreign Investment Promotion Board (FIPB) early this year allowing GPPL to raise the FDI limit in the port operating company from 49 per cent to 100 per cent as part of a Rs 1,100-crore restructuring plan.

The plan involves Maersk acquiring management control of Pipavav Port by hiking its stake from the existing 12.5 per cent to about 45 per cent through purchase of equity from SKIL.

Since the original agreement to develop, operate and manage Pipavav Port was between SKIL and GMB, the change of management necessitates approval from the GMB. However, the State Government has deferred approval for the management changeover till SKIL fell in line and paid the old dues on the OECF loan.

"The Gujarat Government is using the grant of approval for the Pipavav takeover deal as a tool to make SKIL settle the outstanding dues," sources close to the deal said.

The Finance Ministry of Gujarat and GPPL are locked in a long-standing dispute over repayment of a Rs 250-crore OECF loan taken by the Union Government for the Pipavav Ship Breaking Project. Though, the beneficiary of the OECF loan was Pipavav Ship Dismantling and Engineering Ltd (PSDEL), the Union Government is deducting the loan from the State Government's account.

In the absence of an agreement either between the Government of India and PSDEL or between the State Government and PSDEL for repayment of the OECF loan, the Gujarat Government is forced to repay a loan which it has neither negotiated nor taken, the Gujarat Government official said.

He said that the State Government was trying to "strike a balance" without hurting the interests of foreign investors even while protecting the interest of the State. Calling for a "holistic solution" to the vexed issue, he said : "It would cast a liability on the purchaser (Maersk). So, it is in the interest of the purchaser that the matter is settled on the OECF loan," he disclosed.

The Tuesday meeting between Mr Modi and Mr Madsen is expected to discuss ways to resolve the matter in a manner which will give "comfort" to the foreign investor while at the same time ensuring that the State Government recovers the outstanding loan amount fully from SKIL before the deal goes through, the official said.