The global economic uncertainty has put a big question mark on the viability of a new container terminal at Chennai and Ennore ports – together to attract investment worth over Rs 6,000 crore.
Also, the container terminal at Katupalli port built by Larsen & Toubro next to Ennore port is ready with the entire necessary infrastructure, including gantry cranes to handle containers. The terminal is likely to be commissioned any time, thus posing a major challenge to both the projects at Ennore and Chennai.
However, industry sources say since handling of cargo globally will move towards containers from break bulk, there will be enough business for new container terminals.
The presence of container terminals on either side of the port (L&T Kattupalli in the north and Chennai port in the south) will not affect the prospects for the project at Ennore. With an increase in the transport of containerised cargo in future, there will be enough business for all, M.A. Bhaskarchar, Chairman, Ennore Port Litd (EPL), said recently.
The Chennai port’s mega container terminal got poor response with the final bidder, Essar Ports, quoting 5.25 per cent as revenue share. This, the port felt was too low. The reason cited for the low share was the economic uncertainty. The port trust board has formed a committee to seek a possible increase in the offer.
However, sources said that if Essar does not agree for the increase, the port trust may be forced to take a decision on the offer.
The transaction advisor, i-Maritime Consultants, has recommended to the Chennai Port Trust to accept the bid and award the contract in favour of Essar. There has been a global economic slowdown and container handling in Indian ports has been slowing down. In such a situation the viability of the mega project appears weak, and has not attracted many bidders. Hence, the port trust should accept the single bidder’s offers, it says.
The consultant said that if the royalty share was 1.5 per cent, the internal rate of return (IRR) for the port will be 14.11 per cent; if it was 5 per cent the IRR will be 14.91 per cent and if it was 5.25 per cent the IRR will be 14.97 per cent, said sources.
The EPL is reviving its container terminal project after the earlier private terminal operator - Bay of Bengal Container Terminal consortium - had to be terminated in October over delay in finalising funds.
In the earlier bid, the EPL planned to have a container berth of 1 km. However, this time, it has sought suggestions from potential bidders whether to build the same 1 km berth, or build it in phases – starting with 300 metres. “With the global situation not conducive, we need to ascertain the viability of having a 1 km length berth,” said a port official.
On receiving suggestions from potential bidders, the port will appoint a consultant to start the tender process. Based on the companies’ feedback, the port will change some of the parameters to make the project attractive. The terminal is planned for 2013-14, he said.