Logistics

JNPT eyes tax-free bonds to finance dredging work

N. K. Kurup Mumbai | Updated on May 25, 2011 Published on May 25, 2011

Mr L. Radhakrishnan, Chairman, JNPT. — Paul Noronha

Bids called for Rs 1,400-crore contract



Jawaharlal Nehru Port Trust proposes to tap the tax-free bonds route to finance the Rs 1,400 crore dredging work to deepen and widen the port's main channel.

The Government has allowed issue of Rs 5,000 crore tax-free infrastructure bonds for port development in the Union Budget. JN Port is seeking Rs 1,000 crore out of this proposed bond issue for the dredging project. The Shipping Ministry is awaiting guidelines from the Ministry of Finance for the issue of tax-free bonds.

Fresh bids invited

JNPT invited fresh bids for awarding the dredging contract last week and the contractors can submit their bids before June 27. The dredging project, which is crucial to the development of the port, has been pending for the past six years. JNPT has three container handling terminals under it — one run by itself and two by private parties. It is in the process of building a fourth container terminal.

Mr L. Radakrishnan, Chairman, JNPT, told Business Line that the port had earlier approached the Japan International Cooperation Agency, which is keen to finance the project. But there is a problem. JICA can approve the project only in December 2011. “If we wait for JICA, we could lose one full year. So we are looking at other avenues. We could tap the Rs 5,000 crore tax-free infrastructure bonds announced in the Budget,” he said.

He said the port has decided to go for a new method of ‘assured depth” contract. Under this, it is the contractor's responsibility to ensure the assured depth, even if he encounters with any unexpected and additional geological hurdles. “The contract value under this method may be higher, but we will get the assured depth and we will be assured that no additional cost arises out of geological surprises,” said Mr Radhakrishnan.

SPV

He said the port proposes to set up a special purpose vehicle (SPV) for raising the finance, in which, JNPT will hold 90 per cent of the equity and the balance 10 per cent will be held by the Mumbai Port which also shares the navigation channel.

The port has appointed consultant Deloite for advice, he said. The first phase of the dredging for which the bids have been invited now will increase the draught to 14 meters from the current 11.5 meters. This is expected to be completed with in 27 months after the contract is awarded. Tata Consulting Engineers has been appointed as management consultant for the project.

This is the second time JNPT is calling a tender for awarding the dredging contract.

The earlier bid was called off in 2008 as the lowest bid was higher than the port's budgeted amount.

In the second phase of the dredging, the port proposes go in for a draught of 16-17 meters. For this scheme, the port is working out a revenue generating stream, without raising the normal port or ship related charges. “We want to work out an innovative way of financing the second phase,” said Mr Radakrishanan.

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Published on May 25, 2011
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