A consortium of banks and financial institutions led by Andhra Bank, Corporation Bank and Srei Infrastructure Finance is seeking to sell a much-delayed new port project at Dahej in Gujarat to a new promoter that experts say should have been auctioned after repeated defaults by its promoter Sterling Port Ltd, a unit of the embattled Sandesara Group.

Sterling Biotech Ltd, the flagship entity of Sandesara Group, was awarded the rights to develop and operate a new port at Dahej for 30 years through an auction in 2009 and a concession agreement for the project was signed on June 18, 2014. The promoters hold 74 per cent stake in Sterling Port.

In October 2017, the Central Bureau of Investigation (CBI) registered a case against Sterling Biotech for defaulting on loans worth over ₹5,383 crore. The port project at Dahej was granted environment and coastal regulation zone clearances in June 2009 which expired in 2014. Sterling Port, the special purpose vehicle formed to build the new port, was contractually mandated to develop the first phase costing ₹2,501 crore within three years of receiving construction permission which was accorded by the Gujarat Maritime Board (GMB) in 2011. GMB allowed extension of construction period for three more years beginning April 10, 2015. But Sterling Port failed to complete construction even within the extended period.

Termination notice

With no visible progress on the ground, GMB issued a termination notice to Sterling Port in May 2017. The termination notice, though, was not enforced in accordance with the provisions of the Concession Agreement and extensions were granted. Srei Infrastructure Finance, Andhra Bank and Corporation Bank are the main lenders to the project. Sterling Port also owes about ₹100 crore to GMB on account of unpaid lease rentals, construction bank guarantee and interest on unpaid amount. “Despite delays in every possible aspect of implementation, multiple extensions have been granted to Sterling Port. Yet, the project is in limbo, resulting in loss of revenue in crores to the Gujarat government. The GMB, instead of enforcing the concession agreement clauses, is pandering to private interests and repeatedly granting extensions to the project,” said a person briefed on the project.

The uncertainty is hurting the growth of Dahej SEZ besides putting hurdles in the development of Dahej PCPIR, which would need a port to evacuate the cargo, he said. “The lack of logistics facility in the region will result in businesses moving away from the region, exacerbating loss of revenue to the state. This will also affect the social fabric of Gujarat as jobs that were likely to be generated due to increased industrialisation will not be there,” he said.

The Concession Agreement empowers the GMB to terminate the contract for default and encash the bank guarantee of about ₹35 crore. The port contract is yet to be terminated for reasons that could not be ascertained.

“The lenders have submitted a proposal to bring in a new promoter. A decision on this is pending with the state government,” a GMB official said, side-stepping a query on terminating the contract and re-tendering the project. Port experts say that GMB should have scrapped the contract and invited fresh bids for the project. This would have resulted in Dahej Port being awarded to a new developer with established credentials.

By giving the lenders of Sterling Port the right to select a new promoter, an indirect entry is given to a private player without competitive bidding, violating a Supreme Court order on allocation of natural resources.

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