Odisha to sign lease for Subarnarekha port; Tata Steel to acquire 51% stake

The Odisha government will shortly sign a land lease agreement with the developers of the Subarnarekha port. The pact is meant to hand over 693 acres of land for first phase development of the port at Subarnarekha river mouth in Balasore district.

“All formalities are completed now. Only the agreement needs to be signed and we expect it anytime soon — the pact could be inked by the end of this month”, said an Odisha government official.

The agreement is to be signed between the Directorate of Ports & Inland Water Transport and Creative Port Development Pvt Ltd (CPDPL), the special purpose vehicle formed to build the port. 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 Defence ministry, which had earlier raised certain objections, has also given its nod for development of a port at the chosen site, he added. The Subarnarekha river mouth is envisaged to be developed as a commercial port on the build, own, operate, share and transfer (BOOST) model.

As per the agreement signed, Tata Steel would acquire majority stake in CPDPL. The port development is envisaged through a wholly-owned subsidiary, Subarnarekha Port Pvt Ltd (SPPL). The acquisition and development is subject to certain conditions precedent, detailed technical assessments and financial closure.

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. 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. Detailed engineering study to arrive at the configuration and the project cost will be undertaken soon.

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.

The port project proposed at Subarnarekha needs 1,215.43 acres of land for the port area and 1,565.93 acres for the rail corridor. Out of 1,215.43 acres of land needed for the port area, 158 acres constitute Gochar land, 193 acres Bhudan land, 138 acres of encroached land and the remaining 724 acres being free land.

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.