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A new port at Dugarajapatnam in Andhra Pradesh was another thorn in the relations between the ruling Telugu Desam Party (TDP) in the State and the Bharatiya Janata Party-led NDA government at the Centre.
The port project – the second Central-government-run major port if developed – finds a mention in the Andhra Pradesh Re-Organisation Act 2014, approved by Parliament.
Original plan
The planned port was to be designed for a loading capacity of 150.40 million tonnes (mt) of cargo entailing an investment of ₹17,615 crore, according to an initial feasibility study by RITES. It was to be built in two phases with the first phase designed to handle 34.76 mt with an investment of ₹6,091 crore.
While various preparatory works relating to the project were under way, a major change in the State government’s stand forced the Shipping Ministry to rework the basic structure of the project.
The decision to set up a major Port at Dugarajapatnam was based on the commitment given by the Andhra Pradesh government to fund the cost of land, rehabilitation and resettlement (R&R) and external infrastructure.
Out of the total requirement of 3,650 acres of land for the port project, the component of government land is 391.96 acres. The Andhra Pradesh government was to hand over 391.96 acres to the Port Authority and meet the cost of the balance land acquisition, R&R and external infrastructure.
State changes stand
However, the State government subsequently conveyed that they were not in a position, due to budget deficit, to allot funds for the cost of land acquisition, R&R and external infrastructure and said it could only provide government land required for the project.
“As a result of the inability of the Andhra Pradesh government to fulfil its commitment, the project economics underwent a change and upset the basic premise on which it was included in the AP Re-Organisation Act,” a Shipping Ministry official said.
Meanwhile, the Shipping Ministry floated a proposal seeking government grant of ₹1,241 crore to meet the land cost, R&R and external infrastructure costs. In addition, a viability gap funding (VGF) of ₹3,542 crore was sought for making the project viable.
Following this, the Prime Minister’s Office (PMO) asked NITI Aayog to examine ways and means to reduce VGF, according to a Shipping Ministry official.
In turn, the NITI Aayog suggested a restructuring of the project to reduce the VGF component and directed the Shipping Ministry to undertake a fresh feasibility report on the new port after factoring in land acquisition and associated costs.
‘Project not viable’
RITES, which undertook a revised feasibility study, concluded that the project was neither technically feasible nor economically/commercially viable.
“A decision has not yet been taken on what to do with the project,” a spokesman for the Shipping Ministry said.
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