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V O Chidambaranar Port hires SBI Caps to raise ₹2,000 cr of ECB

The government-owned V O Chidambaranar Port Trust (VOCPT) has hired SBI Caps Ltd to raise dollar-denominated external commercial borrowings worth ₹2,000 crore to part-fund a ₹3,462-crore channel-deepening and breakwater construction project to help larger ships to call at the port located in Tamil Nadu’s Thoothukudi district.

“We are planning for a dollar-denominated ECB of ₹2,000 crore and the balance will be funded from our internal resources,” I Jeyakumar, Chairman, V O Chidambaranar Port Trust, told BusinessLine. “SBI Caps has been mandated to raise the dollar loan,” he said, adding that the dredging tender will be issued by end January 2018 and the breakwater construction will begin by April 2018 after environmental clearance and the Shipping Ministry approvals. It is a project aimed at optimisation of the port’s inner harbour in which dredging and breakwater construction will be bundled together, he stated.

VOCPT will add to the growing list of state-owned ports that have or are in the process of raising dollar loans at lower rates to fund expansion plans. Jawaharlal Nehru Port Trust (JNPT) and Kamarajar Port Ltd have separately borrowed dollar loans in the past year, while Deendayal Port Trust (formerly Kandla Port Trust) has hired SBI Caps to tap the ECB market.

VOCPT has a water depth of 14 metres allowing ships with a draft of 12.8 metres and cargo carrying capacity of 60,000 tonnes to call. It plans to increase the depth of the dock basin area to 16.5 metres and approach channel to 17.2 metres to enable fully-loaded Panamax vessels with a capacity of 130,000 tonnes and requiring a draft of 15.2 metres to dock. The doubling of the ship parcel sizes calling at the port will cut logistics cost by 30 per cent, according to Shipping Minister Nitin Gadkari.

The inner harbour optimisation plans also involve increasing the length of the approach channel from 3.8 km to 10.04 km and widening the port entrance from 153 m to 230 m to allow safe entry of larger size vessels.

The port trust also proposes to construct six new berths in the inner harbour investing ₹250 crore, besides modernising the existing nine berths and NCB-I and NCB-II for handling coal, construction materials, general cargo, containers and clean cargo with ₹600 crore. The port trust has also budgeted ₹2,000 crore for installing mechanical cargo handling system for container terminals, bulk cargo and general cargo berths, apart from developing a container parking yard.

Gadkari is pushing the dozen major ports to go for low-cost foreign currency borrowings by leveraging their dollar denominated foreign currency earnings which provide a natural hedge to the ports. This will eliminate the requirement of hedging the foreign exchange risk and will reduce the cost of borrowing.

Vessel-related charges or so-called marine charges such as port dues, berth hire and pilotage are paid by ships calling at a port. Vessel-related charges for foreign-going vessels are denominated in dollars, but collected in rupees after applying the prevailing exchange rate, according to a practice followed since 1991.

Cargo-related charges at ports such as wharfage, crane hire, storage, warehouse, demurrage and estate rentals are denominated and collected in rupees.

Gadkari reckons that the dozen ports can use their dollar earnings to borrow money at 3-5 per cent from overseas instead of high cost rupee loans with interest rates of 12-14 per cent from the domestic market.
Source: The Hindu Business Line

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