With the Telugu Desam Party (TDP) led by N. Chandrababu Naidu assuming power in Andhra Pradesh following polls to the state assembly last year, the prospects of Dugarajapatnam started to fade. Photo: Hindustan Times
India’s shipping ministry is scouting for an alternative location in Andhra Pradesh to set up a new Union government-owned port after its earlier decision to pick Dugarajapatnam in the state’s Nellore district waded into troubled waters because of political and commercial considerations.
The new port project finds a mention in the Andhra Pradesh Re-Organization Act, 2014, approved by Parliament to divide Andhra Pradesh into two with the creation of Telangana as India’s 29th state.
In May 2013, India’s cabinet committee on economic affairs approved building two ports at Sagar Island in West Bengal and Dugarajapatnam in Andhra Pradesh as part of a plan to expand port capacity. These two ports were to be set up as Union government-owned ports with equity participation of 74% from the Indian government and 26% from the respective states—West Bengal and Andhra Pradesh—where the ports were to be located.
The planned port at Sagar Island has progressed with the Union government-owned Kolkata Port Trust signing a joint venture agreement with the West Bengal government in January this year to execute the project.
Dugarajapatnam port has, however, lagged behind though the port limits were notified by the Union government way back in September 2013. The port, designed for a capacity to load 150.40 million tonnes (mt) of cargo, was estimated to cost Rs.17,615 crore, according to a feasibility study by Rail India Technical and Economic Service (RITES) Ltd. It was to be built in two phases, with the first phase designed to handle 34.76 mt and requiring an investment of Rs.6,091 crore.
With the Telugu Desam Party (TDP) led by N. Chandrababu Naidu assuming power in Andhra Pradesh following polls to the state assembly last year, the prospects of Dugarajapatnam started to fade. If developed, it would be the second Union government-owned port in Andhra Pradesh after Visakhapatnam.
The state government has communicated to the shipping ministry its inability to allot funds for land acquisition, rehabilitation and resettlement and development of external infrastructure (which was agreed to earlier by the state) with a suggestion to include these costs in the overall project cost, deputy shipping minister Pon Radhakrishnan said. This hurt the viability of the project.
A revised feasibility report for the port project, prepared by RITES Ltd after factoring in the land acquisition and associated costs to be borne by the Indian government, has concluded that the project was not technically and economically viable, according to a spokesman for Union government-owned Visakhapatnam Port Trust, which was mandated by the Indian government to hold a 74% stake in the new port.
“It will give very poor returns,” the Visakhapatnam Port Trust spokesman said.
There is also a commercial angle blocking the development of Dugarajapatnam.
The location (Dugarajapatnam) has raised viability concerns for private promoters of the nearby Krishnapatnam port as the site falls within an exclusive zone granted to the existing port. “The government of Andhra Pradesh hereby agrees that no party other than the concessionaire (Krishnapatnam Port Co. Ltd promoted by the Hyderabad-based C.V.R. Group) shall have the right to develop a new port within 30km of either side of Krishnapatnam port limits during the concession period (50 years) under the agreement,” according to the concession agreement signed on 17 September 2004 between Krishnapatnam Port Co. and the government of Andhra Pradesh.
Krishnapatnam is India’s second biggest private port by volume after Mundra in Gujarat run by the Adani Group.
New private ports developed by the coastal states with private funds are typically given an exclusive right to operate without a competing facility coming up within a certain radius to improve their viability. The distance varies from state to state.
The revised feasibility study for Dugarajapatnam also took into account the fact that the planned port was 30km from Krishnapatnam port.
MintAsia could not independently verify whether the decision by the Andhra Pradesh government to renege on its commitment to fund the land acquisition and associated costs for Dugarajapatnam and the commercial angle involving Krishnapatnam port were related or not.
The first sign of a rethink by the shipping ministry on Dugarajapatnam was evident during a meeting of the National Sagarmala (Project) Apex Committee chaired by shipping minister Nitin Gadkari on 5 October. A presentation made by the shipping ministry outlined sites identified for developing new ports. The list included Sagar Island in West Bengal, Wadhavan in Maharashtra, Colachel in Tamil Nadu and Tadadi/Belekeri in Karnataka. The presentation was silent on Dugarajapatnam, but said that “one site is to be identified in central Andhra Pradesh”.
For the record, shipping ministry officials say Dugarajapatnam port is yet to be shelved officially. “It is a cabinet decision to select Dugarajapatnam as the site for the new port. The reversal of the decision will have to be taken by the cabinet,” a spokesman for the shipping ministry said.
The Congress party—under whose rule, both in the centre and in the state, the project was approved—is seeking an early implementation of the project, given its potential to generate thousands of jobs for local people. India’s Supreme Court is hearing a public interest litigation filed by Chinta Mohan, a former Congress party lawmaker in Parliament, seeking its direction to the centre for expediting the project.
For Andhra Pradesh chief minister Naidu, who has tendered out three port projects in the state—Bhavanapadu, Narsapuram and Ramayapatnam—to be developed with private funds, it would be much more beneficial to develop these three ports rather than spend money on acquiring land for a port project in which his government will only hold a 26% stake.