Karaikal Port

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The Government (of Union Territory) of Pondicherry (GoP) awarded the development of an all weather deep water greenfield port in Karaikal to Karaikal Port Private Limited (KPPL). Under the agreement that was signed between KPPL and GoP in January 2006, KPPL had the exclusive right to design, finance, build, manage and operate the Karaikal port for 30 years from the commercial operations date. The contract also mandated KPPL to pay 2.6 percent of the annual revenues to GoP for 30 years. The port was initially expected to have two berths and a cargo handling capacity of four million tons per annum. The Karaikal port project was expected to generate significant savings on transportation costs for companies in the major industrial belts of Tamil Nadu and Pondierry. The port was focused on dry cargo mainly comprising of textiles, textile machinery, cement, agro products and chemical fertilizers. This BOT contract was the result of Government of India’s (GOI) commitment to encourage private investments to augment and upgrade the country’s port capacity. To this effect, GOI took several policy initiatives. Of these, the guidelines issued in October 1996 was the most comprehensive, facilitating private sector participation in the construction and operation of additional assets such as container terminals and cargo berths. KPPL was a fully owned subsidiary of Marg Constructions Limited (MCL). However, there was no public information on whether GoP used competitive tender to award the project to MCL. The total cost of the project was estimated to be US$ 92 million. The project reached financial closure in December 2006. A consortium led by Indian Bank provided a debt of US$ 67 million. The other partners in the consortium were Oriental Bank of Commerce, State Bank of Hyderabad, Corporation Bank, Allahabad Bank and India Infrastructure Finance Company. Karaikal port was designated as a minor port. All major ports in India are administered by the central government while the minor ports are administered by the respective state maritime boards under the Indian Ports Act 1908. In terms of tariff setting, the major ports came under the Tariff Authority for Major Ports while the minor ports had the freedom to fix their own tariff. Karaikal port was expected to commence commercial operations by January 2009, but started in April 2009. Further expansions were planned under Phase II to add four additional berths and increase the cargo handling capacity to 10 million tons per annum but no further information was available as of July 2007. The phase 2A started construction in January 2009 and expected to be completed in October 2011. This phase included two berths for Coal & Edible Oil/Multi- Cargo. The cost of phase II was estimated to be INR14.67 billion (US$321 million). The company tied-up the entire debt requirement of Rs.1071cr for Phase 2A from seven banks in 2009. The promoters so far infused Rs.106cr and were close to inking an agreement with two private equity firms for the remaining equity.