Today the Karaikal Port celebrates its sixth birthday and a recent development has given it reason to cut the cake with some cheer. The infrastructure development company IL&FS, which is putting up a thermal power project near the port, has agreed to use the port for bringing coal.

For the slowdown-hit, loss-making Karaikal Port, this business is a godsend. The port, which belongs to the GRK Reddy-promoted Marg Ltd, could handle 5 million tonnes of coal in the coming years to feed the first two 600 MW units of IL&FS subsidiary. This could mean revenues of about ₹200 crore, according to MLN Acharyulu, Executive Director, Karaikal Port (P) Ltd.

Though another subsidiary of IL&FS is attempting to build a captive port for moving coal from its mines in Indonesia, the Karaikal Port is a boon for the power company too because, until its captive facility gets ready, the other options are Tuticorin or Chennai, both quite far from the plant.

Booster shot Karaikal port does need the IL&FS booster shot.

On April 15, 2009, exactly five years to the date, when a massive ship called Beluga Fanfare dropped anchor by the side of the newly-constructed concrete quay at Karaikal and unloaded two huge, 400-tonne cranes, it marked the commissioning of the port.

Though Reddy earned praise from all over for completing the ₹400-crore project ahead of time, the port itself was viewed with both scepticism and optimism.

Sceptics asked ‘where is the business?’ There is no meaningful industry nearby. Optimists said ‘wait and see, the port will spawn industries.’

After all, in the 600-km stretch between Chennai and Tuticorin, there was no port worth the name. To serve the markets of central and southern Tamil Nadu, where 30 million people live, Tuticorin was the only option. With its rocky bottom, Tuticorin is not a deep draft port and, if you want to reach it from northern Bay of Bengal, you have to go all around Sri Lanka.

Performance In five years, the performance of the Karaikal port has proved both optimists and sceptics right. Initially, business boomed. In 2010-11, the port made a pre-tax profit of ₹35 crore.

As Marg Ltd licked its claws for more kill, private equity funds poured in. IDFC, Standard Chartered Bank, Ascent Capital and Jacob Ballas, have put in over ₹600 crore.

Karaikal Port was the only profitable company of the Marg group, which has been trying to build an industrial-cum-residential township and a shopping mall. (The group won a bid to build an airport at Bijapur, Karnataka, but later gave it up finding it unviable.)

Downswing Then came the downswing. Marg Ltd kept investing in expansion even as business fell. The five berths of the port can handle 21 million tonnes; the management had projected 10 million tonnes for 2013-14, but actuals may not exceed the previous year’s 6.5 m t.

The proposed Nagarjuna Oil’s refinery, a potential customer, didn’t happen. The IL&FS’ power plant got delayed.

The port was geared up to handle heavy machinery (‘project cargo’) but it got edible oils and gypsum. In the meantime, interest costs mounted.

The Thane cyclone of December 2011 didn’t help matters. It clogged the port’s mouth, needing costly dredging. (Oriental Insurance has repudiated Karaikal’s Port’s claim of ₹23 crore.)

In 2012-13, it made a pre-tax loss of ₹41 crore, on revenues of ₹221 crore. Interest charges ate away ₹125 crore. For 2013-14, the management had projected a profit of ₹46 crore, but nobody, including Acharyulu, believes there would be any profits.

Expectations Acharyulu expects a profit in 2015-16, but his optimism seems heavily predicated upon IL&FS coal – any delay in the commissioning of the project will harm the port’s balance sheet. Reddy says there will be other cargoes – for instance, the oil company HPCL is mulling using the port for bringing petroproducts to Tamil Nadu.

A lot would depend on the trajectory the Indian economy takes and as such, Reddy, who incidentally also celebrates his birthday on April 15, is busy watching the elections.

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