GMR Group’s move to sell the 100 per cent equity held by Kakinada SEZ Ltd in Kakinada Gateway Port Ltd violates the concession agreement signed in 2018 and does not have the backing of the Andhra Pradesh government, multiple sources said.

GMR Infrastructure Ltd said on Friday it had signed definitive agreements for the sale of 51 per cent equity held by its wholly owned subsidiary GMR SEZ and Port Holding Ltd in Kakinada SEZ Ltd (KSEZ) to Aurobindo Realty and Infrastructure Private Ltd. As part of the proposed transfer of stake of KSEZ, the 100 per cent equity stake of Kakinada Gateway Port Ltd held by KSEZ would also be transferred to Aurobindo Realty, GMR said in a statement.

AP government officials briefed on the matter said the sale violates the lock-in period prescribed in the concession agreement for promoter’s stake. “The concession agreement for private ports awarded by the government stipulates a lock-in period of five years for promoter’s stake. After that only they are free to sell the stake and that too with the approval of the government,” a top official in the State government said.

“Granting approval does not arise now as the port project is still in the lock-in period,” he said. “Kakinada SEZ is fully operational. The change in ownership/shareholding for the same is permitted as per the provisions. As per the standard process, approvals from requisite state and central government bodies are required for the change. These will be obtained in due course,” a spokesperson for GMR said.

He, however, did not respond to a specific query on diluting stake in the port project.

Pact with AP govt

In November 2018, Kakinada Gateway Port signed a concession agreement with the Andhra Pradesh government for development of a greenfield commercial port spread over 1,811 acres on design, build, finance, operate and transfer (DBFOT) basis at Kona village in East Godavari district with an investment of ₹2,123 crore.

Kakinada Gateway Port is contractually mandated to share 2.7 per cent of gross revenue with the State government during the first 30 years, 5.4 per cent from 31 to 40 years and 10.8 per cent during 41 to 50th year of operations. The port would be developed over 1,811 acres.

In 2007, KSEZ was permitted to construct a captive port for handling cargo generated from the SEZ such as refinery products and LPG. In 2016, GMR filed a suo-moto proposal with the State government to convert the captive port into a commercial port on DBFOT basis. The proposal also included the percentage of gross revenue it was willing to share with the government.

The State government then sought competing counter proposals to select a developer for the project in which GMR was given the right of first refusal to match the highest bid.

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