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Kakinada, Vodarevu ports in AP handed over to private companies

Shireen in Hyderabad

The deepwater port at Kakinada and the greenfield port at Vodarevu in Andhra Pradesh have been entrusted to private parties for operation and development.

Kakinada Port will be administered by the Singapore-based International Sea Ports Private Limited and Vodarevu Port by Indian Barytes and Chemicals Limited.

Kakinada's is an intermediate port that handles about two million tonnes of cargo annually by way of anchorage. ISPPL will start its operations from April 1, 1999.

The company has been given the necessary powers to operate the port and the conservancy lies with the state government. The movable and immovable assets have been handed over and their survey and inspection will take another week.

ISPPL has three major partners -- Larsen & Toubro Limited (India), Stevedore Shipping Agencies International of the United States and Precious Shipping Public Company of Thailand.

ISPPL will submit the operations project report to the state government within three months. The report will deal with the operational plan of action, deadline for the construction of the new berths and the cargo types to be handled.

ISPPL will operate the three existing berths of the deepwater port at Kakinada on the "operate, maintain, share and transfer" basis and construct the fourth berth on the build, operate, maintain, share and transfer basis.

ISPPL will further develop the Kakinada Port by the year 2007 with an estimated project cost of Rs 3.85 billion under a two-phased plan. The port will have the ultimate capacity to handle 7.5 million tonnes of cargo per annum.

The agreement between ISPPL and the state government was signed on March 19, 1999. The deepwater port will be under the control of ISPPL for 20 years and this can be extended by another five years.

All the opposition parties in the state -- the Congress, the Bharatiya Janata Party, the NTR-Telugu Desam Party, the Anna-Telugu Desam Party, the Communist Party of India and the Communist Party of India-Marxist -- have been opposed to the privatisation of Kakinada Port. They say it has been developed into a deepwater port under an Asian Development Bank-funded project during 1993-96 with assistance of $ 79 million.

The total expenditure on the project worked out to Rs 2.93 billion. The state government has justified the privatisation of Kakinada Port, saying that the ADB loan assistance was not sufficient to provide full-fledged facilities at the port.

For optimum utilisation of the facilities created so far, a further minimum investment of Rs 2 billion is required. The master plan for development of deepwater port envisages another 10 to 15 berths which require at least Rs 15 billion.

Works on the deepwater port were completed in December 1996 with the construction of 1.5 kilometres of breakwaters and three shore-connected berths to receive ships.

The deepwater port has not been earning sizeable revenues. Its revenues amounted to Rs 35.5 million in 1997-98 and Rs 80 million in 1998-99. However, the port is incurring heavy losses due to the repayment commitments on the ADB loan.

With the privatisation of the deepwater port, the state government will get a total revenue of Rs 16.36 billion as its share in ISPPL's operating revenues from Kakinada Port over a 20-year period. The state's revenues from the Kakinada deepwater port privatisation will grow from Rs 208 million in the first year to Rs 1.08 billion in the last year of the agreement period.

The development of the deepwater port and leasing of its berths will not affect the working of the nearby anchorage port where an estimated 10,000 port workers are employed.

The traditional cargo handling at the anchorage port such as rice bran and solvent extractions will continue to be handled by the anchorage port and there will be no cargo diversion to the deepwater port.

Under the agreement for Vodarevu Port, the consortium consisting of Indian Barytes & Chemicals Limited, Vam Management Services Limited and Ship Steel India Limited will develop the port for ship-breaking and lighterage operations. The project is expected to speed up the economic development of Prakasam and adjacent districts with potential for large-scale employment.

Vodarevu is now a greenfield port without any assets and infrastructural facilities and it was offered for private development through global bids as part of the liberalisation policy. The port will be under the control of the consortium for 18 years with a provision for extension by another ten years in two stretches of five years each.

The IBCL consortium has incorporated the Andhra Sea Ports Limited to take up the Vodarevu Port work. The consortium proposes to spend Rs 200 million in the first phase and Rs 300 million in the second phase of five years each and Rs 3.50 billion for the third and last phase covering ten years.

The state government will receive 'nil' profit out of this privatisation during the first two years and the profit accruing to the exchequer after this period and upto the eighth year will be three per cent and thereafter five per cent. The state government will not invest any funds in this venture. It will transfer 200 acres of land on lease to the consortium.

Krishnapatnam in Nellore district is the first state port to be awarded to a private party for which agreement was executed in January 1997. The NATCO Pharma Limited formed the Krishnapatnam Port Company Limited for the development of Krishnapatnam Port. The selection of private parties for the development of Gangavaram and Machilipatnam Ports is being finalised by the state government.

In all, Andhra Pradesh has 11 notified minor ports. These are: Kakinada, Machilipatnam, Krishnapatnam, Vodarevu, Gangavaram, Bhavanapadu, Kalingapatnam, Bheemunipatnam, Mutyallammapalem, Narsapur and Nizampatnam. No bids were received for the development of six of these ports.

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