Logistics

Mamata Banerjee looking to boost ‘reformer’ credentials with Tajpur port project

P Manoj Mumbai | Updated on October 24, 2021

Bid to be decided on basis of highest premium net present value (NPV) offered by bidder to the State

Mamata Banerjee is seeking private investment to build a greenfield port at Tajpur in West Bengal’s Purba Medinipur district, on a concession period of 99 years, something that neither the Centre nor any coastal state has ever attempted, as the chief minister tries to shake off her investor unfriendly image with an eye on pan-India political ambitions.

The bid will be decided on the basis of the highest premium net present value (NPV) offered by a bidder to the State government, by following a method that has not yet been adopted elsewhere in India’s port privatisation programme.

According to the tender terms, bidders would be required to quote the royalty rate per metric tonne (mt) for cargo handled at the port, irrespective of the cargo type or commodity. Besides, they have to indicate the cargo traffic projections for seven years, starting from the royalty commencement date.

The project will be awarded to the bidder whose financial bid (royalty rate and cargo throughput estimates) results in the highest NPV to the government.

The State government will transfer 126 acres of land on lease to the successful bidder for developing the port. It will also transfer a further 1,000 acres of land on lease to the port developer for port estate development. The port developer will be allowed to undertake estate development for commercial purposes at the port estate development site, with the right to sub-lease/ assign any or all parts thereof.

The ownership of the land, though, will vest with the State government at all times.

Building new ports with private funds added greater sheen to the profile of the then Gujarat chief minister Narendra Modi when he pursued a national role in politics. Gujarat is now India’s biggest state in terms of cargo handled by private ports that are outside the control of the Central Government.

In Gujarat, the port concessions have so far been awarded to private firms for 30 years. For a new port at Nargol, the Gujarat government, though, is looking to award the project for 50 years. 

Other states such as Andhra Pradesh, have typically followed a 30-year initial concession period for port projects, which can be extended by two terms of 10 years each.

“A concession period of 99 years gives a cushion to the port developer,” said a top official with a port operating company. “The longer the concession period, more the opportunity for the port developer. Land lease for 99 years is as good as ownership. It will not only help develop the port, but also real estate infrastructure,” he said.

West Bengal is among three of eight coastal states that haven’t developed a non-major port with private funds. The State and its hinterland rely on the more-than-century-old riverine port of Kolkata - owned by the Central government - for export-import needs.

Earlier attempts to build new port

Tajpur was not the first choice to build a new port in the State, to provide users an “alternate option” to handle their cargo given the infrastructure challenges at Kolkata Port Trust.

The Centre had identified Sagar Island for the new port and even notified it as a major port in 2016. A special purpose vehicle named Bhor Sagar Port Ltd was set up to build the new port, with the Kolkata Port Trust holding 74 per cent equity and the West Bengal government the remainder.

The Public Investment Board approved a ₹515-crore grant/ subsidy to Bhor Sagar Port Ltd for reclaiming land, dredging and erecting basic infrastructure for the new port. A proposal was drafted to secure Cabinet approval for the grant/ scheme.

At this juncture, the West Bengal government-led by Mamata Banerjee swung into action to take up the Tajpur project as a state government project.

The Centre made a futile attempt to develop Tajpur port as a central sector project by seeking an assurance from the West Bengal government “to give a so-called right of first refusal to Bhor Sagar Port Ltd in case it decided to set up a new port in the State”.

But this was not acceptable to the State government as it meant giving a 74 per cent stake to the Centre for developing Tajpur.

Opportunity for Mamata

Years ago, when the Tata Group fled the State following strident opposition from the Trinamool Congress to its ‘Nano’ small car project, Modi moved swiftly to facilitate the car plant at Sanand, drawing much appreciation from the industry, including from Ratan Tata.

“If she makes Tajpur a reality, then it would go a long way in refurbishing her image. The Singur episode was a big blot on her,” said a port industry consultant.

“Reality means you lead the road shows, select a port developer, structure the project, oversee its construction and make it operational. This would indicate that West Bengal means business,” he said.

Tajpur, according to another expert, will face strong competition from Subarnarekha port planned by Tata Steel Ltd, in neighbouring Odisha.

“In my view, between Tajpur and Subarnarekha green field ports, only one project is sufficient. In case, the West Bengal government is able to attract either SAIL, JSW or Adani as developer of the project ahead of the financial closure of Subarnarekha port project, Tajpur could become more attractive and would have a positive impact on the State government. For this, the West Bengal government will have to act fast, similar to the Andhra Pradesh government, which awarded the Ramaypatnam Port EPC contract in record time,” said Ramesh Singhal, Director at i-maritime Consultancy Pvt Ltd.

Published on October 24, 2021

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