Shipping Ministry meeting later this week to discuss request
Three major ports have approached the Government for approval to raise Rs 3,500 crore through issue of tax-free bonds.
Jawaharlal Nehru Port Trust has sought the highest amount of Rs 2,000 crore, while the Mumbai Port has asked for Rs 500 crore and Ennore Port, Rs 1,000 crore.
The Union Budget earmarked Rs 5,000 crore tax-free bonds for the port sector, out of the Rs 60,000 crore low-cost fund raising plan for infrastructure development.
Besides ports, the public sector Dredging Corporation of India has also put in its request for raising Rs 500 crore by issuing tax-free bonds.
The Shipping Ministry has convened a meeting to discuss these proposals later this week, a port official said.
Last year too the Budget had allowed ports to raise Rs 5,000 crore through this route, but they could not make use of it. This was because the Shipping Ministry could not find a suitable entity acceptable to the Finance Ministry to issue the bonds.
This time around, the proposal is for the ports to float the bonds, but on their own.
Unlike sectors such as rail, road or power, there is no dedicated financial institution for the ports sector.
Earlier, it was expected that the Shipping Ministry may seek permission to issue tax-free bonds by the proposed India Ports Ltd, a new entity being set up to make investments in the sector.
Tax-free bonds generally enable the issuer to raise funds at a lower rate compared with normal bonds. According to tax experts, the difference in interest rate could work out to 2-2.5 percentage points.
Port officials said the Shipping Ministry has approved the proposal in–principle. But, the final clearance has to come from the Ministry of Finance.
Last year, the Finance Ministry rejected JNPT’s proposal on the ground that the port has surplus in its kitty. JNPT has cash reserves of around Rs 3,000 crore.
JNPT wants the funds mainly for its capital dredging project, the contract for which has been awarded to a Dutch company.
The Mumbai Port, although facing a downturn in terms of volume of cargo, also has cash reserves of over Rs 4,000 crore.
Ennore, the relatively new and the only corporatised port in the country, may not have much surplus.
But it is concerned about the stipulation that the funds raised should be utilised within two quarters.