The Hindu Business Line : Tuticorin Port to get Rs 200 cr from IDBI to prepay Japan bank loan

TUTICORIN Port Trust (TPT) has negotiated a Rs 200-crore loan from IDBI to help prepay a loan taken from the Japan Bank for International Cooperation (JBIC) in 1999 for funding the capital dredging project at the port.

The IDBI loan, which will be finalised in the next few days, carries an interest rate of 6.5 per cent with a tenure of seven years, a Shipping Department official said. " TPT is expected to draw the loan amount in January for prepaying the yen loan," he added.

The proposal submitted by the Port Trust to prepay the principal outstanding on the JBIC loan with the approval of the Board of Trustees has been endorsed by the Shipping Department in the Ministry of Shipping, Road Transport & Highways.

The principal outstanding on the JBIC loan is estimated at Rs 252 crore on March 31 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.

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 from ships calling at the port 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.

The special dredging levy will continue even after the pre-payment of the yen loan though the Port Trust will make proper adjustment in rates based on the revised cost. " The revised cost will be reflected in the next revision of the special dredging levy", the official stated.