Tata Steel to speed up acquisition of Subarnarkeha port in North Odisha

After recent execution of land lease deal with port authorities, 693 acres is being transferred by Odisha govt for phase-1 development of port

Tata Steel is looking to speed up acquisition of majority stake in Creative Port Development Ltd (CPDL), the special purpose vehicle formed to develop the Subarnarekha port off the coast of north Odisha.

After the recent execution of land lease agreement with the port authorities, 693 acres of land is being transferred by the Odisha government for facilitating first phase development of the port.

“Tata Steel after its announcement had acquired a token equity of three per cent in CPDL. But, after the leasing of land, they are now keen to complete their acquisition. Construction work on the port is expected to commence in three to four months once the approaching road to the port site is ready. All other hurdles including objections from the Defence ministry have been overcome", an official source said.

Tata Steel, in January last year has already inked a definitive agreement with Chennai-based CPDPL to pick up 51 per cent equity in the port project from the original promoters.

The Subarnarekha river mouth is envisaged to be developed as a commercial port on the build, own, operate, share and transfer (BOOST) model. The port development is envisaged through a wholly-owned subsidiary, Subarnarekha Port Pvt Ltd (SPPL). The acquisition and development are subject to certain conditions precedent, detailed technical assessments and financial closure, Tata Steel had said previously.

The cost of acquisition will depend on the capital outlay of the project which is under investigation and will be firmed up after studies are completed. Initially, the port development cost was assessed at Rs 23 billion (Rs 2300 crore) when the concession agreement was signed in 2008. But as the port project was mired in delay due to litigations, the revised cost is now seen at Rs 42 billion (Rs 4200 crore).

CPDPL, promoted by two technical entrepreneurs, Ramani Ramaswamy and Ramaswamy Rangarajan, had entered into a concession agreement with the Odisha government in January 2008 to develop the Subarnarekha port in Balasore district as an all-weather deep-draft facility.

According to the concession agreement signed originally, the port would have an initial capacity of 10 million tonnes per annum (mtpa) which was to be scaled up to 40 mtpa in 10 years. As per this agreement, the port developer would share revenue with the state government at the rate of five per cent from first to fifth year, eight per cent from sixth to 10th year, 10 per cent from 11th to 15th year and 12 per cent for the remaining 15 years.

For Tata Steel, the Subarnarekha port is expected to address its long-term strategic needs. The port location also makes it attractive for the company to structurally enhance the competitive position of its Indian operations, especially the Kalinganagar greenfield steel project in Odisha.