The Hindu Business Line : Consultants suggest PPP route for Kochi cruise terminal

The report, prepared by Mir Projects and Consultants Pvt Ltd, Kochi, and TranSystems, Virginia, US, estimates an investment of Rs 375 crore for the project. It has also
set a debt equity ratio of 68:32.

V. Sajeev Kumar

The much awaited feasibility report and the business plan for the proposed international cruise terminal and public plaza has been submitted to the Cochin Port Trust, wherein consultants have suggested setting up the facilities in public-private-partnership (PPP) mode under the build-operate-transfer (BOT) route.

The report, prepared by Mir Projects and Consultants Pvt Ltd, Kochi, and TranSystems, Virginia, US, has estimated an investment of Rs 375 crore for the project. It has also set a debt equity ratio of 68:32.

According to the consultants, cruise terminal is a project with a long gestation period and revenue from terminal operation, when compared to the investment, might not be attractive. Hence, they proposed a mix of commercial activities together with the main business.

The project comprises building a world-class cruise terminal, a Kerala Village as a major tourist attraction, a 238-room hotel complex, shopping mall and office complex as well as a parking garage.

The port has earmarked 6.71 hectares of land for the project of which 4.24 will bring in lease income while the rest of the area will be developed through a special purpose vehicle (SPV). The report recommended a joint venture company with a total of 26 per cent stake for the port. The PPP structure can have a definite end period and the port trust could fix the lease period for the land which will be the operating period of the developer.

Inviting a developer through global tender and setting acceptable standards will be the Port’s job. Once a developer is selected and an agreement is signed, the SPV can be formed for implementing the project.

The total construction cost will add up to more than Rs 285 crore. The study report has put the cost of building the cruise berth at Rs 61.22 crore, cruise terminal building at Rs 40.94 crore, Kerala Village at Rs 6 crore, shopping mall and office tower at Rs 79.57 crore and hotel complex at Rs 83.53 crore. Walkways, a park and bus circuit will be additional facilities.

November 2010 deadline

The port has set an ambitious deadline of November 2010 for completion of the project. However, the implementation is expected to take approximately 30 months between late 2009 and July 2011.

The project will have a significant economic impact on Kochi and the cruise terminal projects will generate direct employment for 1,500 people. Besides, the study has projected Rs 23 crore in annual crew and passenger spending by 2015. This can go up to Rs 58 crore annually by 2025.

Bunker purchases and ship services will be the major activities that will come along with the implementation of the project.

The report also projected that more than 50 per cent of the revenue will accrue from the hotel complex. The study also suggested various initiatives including an initial branding exercise and Kochi Port’s representation at the annual Sea Trade Convention in Miami, Florida.

The consultants pointed out that cruise tourism has emerged as the fastest growing sector of the global tourism industry over the past decade. Among Indian ports, Kochi has been the cruise port in India with maximum cruise calls. The port, located close to the international trunk sea route from Europe to Far East/Australia with a deviation of only 72 nautical miles, prompts cruise liners to take advantage of the tourist attraction.

The port has modern deep water facilities and further development will facilitate the handling of bigger cruise vessels with 360 metres length and beam over 40 metres.

The current financial year will see the port receive 42 vessels, the highest ever in India. Though the port handles the largest number of cruise liners, it lacks a dedicated cruise terminal. Globally cruise liners collaborate with ports for the construction and operation of cruise terminals in light of the growing popularity of cruises and the trend towards larger ships.

Kochi Port will also seek participation of private investors in the venture, including international cruise lines, which will contribute financially as well as in marketing and operation of the terminal.