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Sical gets approval to convert iron ore terminal into a coal facility

Tuesday, 21 February 2012 | 00:00
The board of Union government-controlled Ennore Port Ltd has approved a request from Sical Iron Ore Terminals Ltd to handle coal at its Rs500 crore iron ore-loading facility after a ban on export of the ore from Karnataka has rendered the terminal idle since it was opened in January last year.
This is the first instance of such a cargo change being allowed after a port contract has been tendered and awarded.
Sical Iron Ore Terminals is a joint venture firm formed by Sical Logistics Ltd and state-run commodity trader MMTC Ltd to develop and operate the new iron ore terminal at Ennore port in Tamil Nadu, India’s biggest iron ore loading facility, for 30 years. Sical Logistics has a 74% stake in the project while the rest is held by MMTC.
“At a meeting on 10 February, the board of Ennore Port gave its in-principle approval to convert the iron ore terminal into a coal terminal,” said Rakesh Srivastava, a joint secretary looking after ports in the Union shipping ministry. Sical Iron Ore Terminals will be allowed to “handle only the coal sourced by Tamil Nadu Electricity Board (TNEB) to fire its power stations”, Srivastava, who also sits on the board of Ennore Port, said.
TNEB is expected to ship about 10 million tonnes (mt) of coal a year through Ennore. This condition will ensure that the exclusive rights granted to Chettinad International Coal Terminal Pvt. Ltd to handle coal for customers other than TNEB at Ennore port is maintained.
“The board’s in-principle clearance is subject to requisite final approval from the government,” Srivastava said.
V. Ganesh, managing director of Sical Iron Ore Terminals, declined to comment saying that “these are issues that are outside my purview”.
Demand for shipping coal through Ennore has surged after the Madras high court directed Chennai port, located 20km from Ennore, to stop handling dusty cargo such as coal and iron ore from 1 October, to check pollution in north Chennai. The permission to change cargo will help the project lenders avert the asset from turning sticky.
In March 2008, a consortium of banks led by Yes Bank Ltd had agreed to lend Rs340 crore for constructing the terminal.
Sical Iron Ore Terminals had applied for the port’s permission to change the cargo profile after a Supreme Court ban on mining of iron ore in Karnataka’s Bellary-Hospet region caused exports to dry up, rendering the facility non-functional.
The iron ore terminal at Ennore port, with an annual capacity of 12 mt, was inaugurated in by shipping minister G.K. Vasan, but is yet to start commercial operations. The terminal is totally dependent on the commodity originating from the Bellary-Hospet belt for its operations.
In July 2011, India’s apex court imposed a blanket ban on mining in the mineral rich Bellary-Hospet belt in Karnataka to check environmental damage. The Supreme Court extended the ban in August to cover Chitradurga and Tumkur districts in Karnataka, hampering output and hurting exports from the world’s third-largest supplier of the commodity.
The Sical-MMTC partnership won the contract in a public tender in 2006 by agreeing to share 52% of annual revenue with the port. Sical Logistics is now 57.08% owned by Tanglin Retail Realty Developments Pvt. Ltd, a unit of Bangalore-based Café Coffee Day group promoted by V.G. Siddhartha.
“Various power plants in the region have been waiting for an increase in Ennore’s coal handling capacity and hence this decision will benefit them,” said Neeta Ramnath, senior vice-president, transportation advisory at Feedback Infrastructure Services Pvt. Ltd. “A dip in iron ore volume would have affected the viability of Sical’s investment in Ennore and hit Ennore Port’s revenue from this project adversely.” There is a need, however, to ensure that there is “no unfavourable impact on the coal terminal run by Chettinad International,” she said.
Source: Live Mint
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