JNPA Chairman Sanjay Sethi told ET Infra that the port authority and IDBI Capital Markets and Securities Ltd have held preliminary discussions with potential funding agencies such as financial institutions, banks, and multilateral organizations to arrange funds for the project.
“Lenders have shown strong interest in the project,” Sethi said, noting that the initial funding for the project will come from the equity contributions of the port promoters.
The upfront equity commitment, determined in collaboration with the lenders, is aimed at boosting lenders confidence in the project, bringing greater predictability to project execution, and reducing the Interest During Construction (IDC) component.
The debt will be raised in phases subject to finalisation of project structuring and timeline of revenue generation on the back of award of concessions to private firms for running cargo terminals.
The project is currently awaiting environmental and coastal regulation zone clearances and investment approval from the Union government. These are expected by March-April.
The new port will be developed by Vadhvan Port Project Ltd, a joint venture between JNPA (74 percent stake) and Maharashtra Maritime Board (26 percent equity), in two phases under the landlord model, per the government policy, with an investment of Rs76,220 crore.
The core and common infrastructure including breakwater, dredging, reclamation, shore protection bund, tug berth, approach trestles and unpaved developed land, rail and road linkages, off dock rail yard, rail exchange yard, power and water and internal road will be built by Vadhvan Port Project Ltd (VPPL) with an investment of Rs43,622 crores. This includes an investment of Rs1,765 crores by the Ministry of Railways for external rail connectivity, Rs2,881 crores for external road connectivity by the Ministry of Road Transport and Highways/National Highways Authority of India and Rs356 crores as depositary works from Maharashtra Jeevan Pradhikaran and Maharashtra State Electricity Distribution Company Ltd.
The remaining project cost of Rs37,244 crore will be invested by the private operators of container terminals, multipurpose berths, coastal cargo berths, RO-RO and liquid berths selected by VPPL.
The new port will be funded on a debt-equity ratio of 70:30 backed by corporate guarantees from JNPA and Maharashtra Maritime Board (MMB). The equity contributions of JNPA and MMB would be in line with their respective shares, according to the financial structure finalised in consultation with lenders.
The total debt requirement for the project is estimated to be around Rs 27,283 crore (Rs 21,598 crore in Phase 1 and Rs5,685 crore in Phase 2). The debt will be arranged progressively throughout the project execution in phases.
VPPL will explore multiple options for raising long-term debt, including rupee term loans from banks and financial institutions, Non-Convertible Debentures (NCD’s) and External Commercial Borrowings (ECB’s) with the aim of optimally matching the project’s cash flows with the most advantageous financial arrangement.
The planned deep water port will help India break into the list of countries that are among the top 10 global container ports. Vadhavan Port will be designed to handle 24.5 million twenty-foot equivalent units (TEUs) a year, a capacity which none of the existing Indian ports can offer due to natural limitations.
Further, its strategic location on the west coast at a short distance from the international sea route, helps Vadhavan Port to position itself as a hub port in the Arabian Sea catering to the container traffic of east coast of Africa, India’s west coast, and countries in the Persian Gulf.
Vadhavan will be the first major port (owned by the Union government) to be built in more than two decades (the last was Kamarajar Port in Tamil Nadu which started operations in February 2001). It will also be the first major port to be developed in partnership with a state government.
For securing environmental clearance for the new port, a public hearing was held on 21 December at Daman.
The public hearing at Daman was held by a Committee of the Pollution Control Board which was attended by various stakeholders including fishermen. The concerns expressed by the stakeholders were addressed during the public hearing, which went smoothly, a JNPA official said.
The plan to set up a port at Vadhavan has been opposed by locals, farmers, and fishermen.
To dilute the opposition, JNPA has decided to shift the location of the new port to 5-6 kms inside the sea from the previous onshore site.
The new offshore site for building Vadhavan Port falls within the domain of the Central government and beyond the area of Dahanu Taluka.
On 31 July, the Dahanu Taluka Environment Protection Authority (DTEPA), granted a no objection certificate to J N Port Authority to develop Vadhavan Port subject to various terms and conditions imposed by the Ministry of Environment, Forest and Climate Change (MoEF&CC) and its authorities.
DTEPA was set up by the Union Government in 1991 as an oversight agency to monitor projects while notifying Dahanu taluka as an ecologically fragile area.
“Thus, now, the location is offshore, and, as a result of which, the issues about the ecologically fragile area, environmental damage and pollution in Dahanu Taluka would largely be done away with. The legal position is that the offshore area would fall within the complete domain of the Central government, and beyond the area of Dahanu Taluka,” Justice Arun B Chaudhari, Chairman, DTEPA, wrote in the 31 July order.
The move to shift the port location offshore also stemmed from difficulties associated with sourcing of material for reclamation. Under the revised plan, the filling material for reclamation, estimated at some 200 million cubic metres, will be sourced from marine borrow pits located off the coast of Daman some 50-65 kms away instead of relying on earth filling due to the ecological sensitivity of the region.
Under the earlier plan to build the port onshore, the reclamation material was to be sourced from land, which involved cutting hills to source the sand, adding to the environmental concerns surrounding the project.
Besides, sand suppliers were asking for some Rs2,000 per cubic meter from J N Port Authority for supplying the reclamation material, which, if agreed to, would have hurt the viability of the project.
The government reckons that the new port will be viable only if the reclamation material is sourced at about Rs500-800 per cubic meter.
Sourcing sand from Daman would meet this objective.
Further, the area off the coast of Daman from where the sand will be sourced is beyond the Coastal Regulation Zone (CRZ) and falls in the Exclusive Economic Zone (EEZ), making it easier to get approvals for procuring the reclamation material.
The marine sand will be dredged from depths of 20-25 metres using a trailing suction hopper dredger (TSHD), transported and dumped at the reclamation site.
By choosing to relocate the project site to offshore from onshore, JNPA has managed to dilute opposition from local farmers and fishermen against the project, improve the viability and operational efficiency of the planned port and reduce logistics costs.
“The government’s policy managers have taken the project to such a level that nobody (political parties) can now think of reversing it,” said a source involved in the project.
The construction of a new port at Vadhavan is key to the expansion plans of JNPA given the limitations on expansion at Nhava Sheva (where J N Port is located).
