FinMin rejects Cochin Port Trust's demand for interest waiver

The trust had sought waiver of Rs 715 crore of penal interest on a Rs 258-crore outstanding loan

The finance ministry and the Planning Commission have rejected the Union shipping ministry’s proposal to waive Rs 715 crore of penal interest due from Cochin Port Trust (CPT) on a Rs 258-crore loan.

Of the total penal amount of Rs 729 crore, the government could have forgone Rs 715. CPT’s request for this had been pending for over a year.

While considering the proposal, the department of expenditure under the finance ministry had raised questions on CPT’s performance and asked it to prepare a turnaround plan. Based on those observations, the port had started preparing a strategy, of which interest waiver was a part, a senior port official said.

CPT has been plagued by two major problems. The International Container Transhipment Terminal (ICTT), built to wean away the dependence on Colombo Port for transshipment, is performing at 35 per cent of its total capacity. While the cost of dredging has been increased to enable larger vessels to dock at ICTT, the revenue generated from it have been paltry, even after cabotage relaxations. Additionally, Petronet LNG terminal’s pipeline has also not been fully laid yet, so revenue has suffered.

CPT had during the previous government’s term sought a waiver of Rs 715 crore of penal interest, after factoring in the mandatory 0.25 per cent a defaulter has to pay.

Port trusts borrow from the Centre to develop and upgrade infrastructure and the loans, unless repaid on time, trigger penal interest.

In addition to CPT’s request, Paradip Port Trust (PPT) and Vishakhapatnam Port Trust (VPT) had also approached the ministry for waiver of penal interest on government loans. A Cabinet note is in the final stage of preparation for both. However, a refusal to forgo CPT’s penal interest is seen presaging the others.

The combined interest amount on the three port trusts would stand well over Rs 1,000 crore.
 
The shipping ministry and Paradip and Visakhapatnam port trusts differ on how much they owe the government. When loans are availed of from the shipping ministry, the tranches of interest repayable are appropriated first to the penal interest due, then to the normal interest applicable, and finally the borrowed principal.

Paradip and Vishakhapatnam ports have paid the principal amount, along with some additional interest, according to a ministry source. If it were to receive a waiver, the total outstanding debt of Cochin Port Trust would come to Rs 528 crore. That amount would be frozen and become repayable over a period of 15 years.

Cochin Port Trust has faced problems with its credit ratings as well. A freezing of debt would have facilitated credit inflow after issuance of fresh ratings. However, asked how it planned to address the penal interest and credit flow issues, CPT officials refused to comment.