Kakinanda Port Privatisation Hits Stumbling Block

While technocrats want private parties to develop only the remaining nine berths planned on a BOT basis, bureaucrats want the entire set up to be given to the private sector

The proposal to privatise the upgraded facilities at Kakinada port has hit a hurdle with technocrats and bureaucrats differing on the extent of privatisation.

While the technocrats want the existing facilities, including the three newly constructed berths, to remain with the government and allow private parties to develop the remaining nine berths planned, bureaucrats want the entire set up to be given away to the private sector.

The technocrats contention is that the government has incurred a huge cost of Rs 293.90 crore for setting up the new facilities. Of this, Rs 246.07 crore came from an Asian Development Bank loan.

However, they do agree that the government does not have funds to add nine more berths, as originally envisaged, and hence are in favour of the private sector taking it up on a BOT (built operate transfer) basis.

Bureaucrats in the state transport, roads and buildings department handling the privatisation proposal maintain that though the port has been modernised, the infrastructure facilities in the backup area and adjoining land needs to be further improved for smooth functioning.

This would mean greater investments, recurring and non-recurring, which is beyond the government resources.

Besides Visakhapatnam and Chennai ports, which are very congested, Kakinada is the other alternative modern port on the south-east coast.

The current proposal is to handover the port management and operation to the private sector, with the government getting between Rs 7-20 crore per year during a 35-year lease period.

A private owner will pay a sum of Rs 7 crore to the government this year, Rs 11 crore in the second year, Rs 16 crore in the third year and Rs 20 crore per year thereafter.

However, the annual ADB instalment of Rs 33 crore will remain a commitment of the government.

According to sources, the original privatisation proposal was restricted to construction of the additional berths.

Later on, the government called for bids for port management and operation, stipulating that the bidder should pay an annual amount of Rs 50 crore to the government for the facilities already commissioned.

The government has shortlisted four firms Konsortium Perkapalan Berhad of Malaysia, ABG Heavy Industries, Continental Warehousing and Pembinaan Redzai SDN BHD of Malaysia along with a consortium consisting of L&T, International Seaports Pte Ltd of Singapore, Steredoring Services of USA and Precious Shipping Public Co. Ltd of Thailand, to handle the port operations.

A government spokesman said a decision on the bids will be taken by early December.

Since the creation of the new facilities, the port has handled sixty six ships and earned a revenue of Rs 2.75 crore. 13 ships were handled in September, the largest so far, earning a revenue of Rs 47.47 lakh.

Income from the port is projected to be around Rs 15 crore this year, which is likely to reach Rs 30 crore in three years time. In the fifth year, it is projected to exceed Rs 50 crore.