ShipMin seeks PPP panel nod for Nicobar port project in private mode

PPP models need to reduce structural uncertainty, need more private investment in greenfield projects

The Centre is moving on its ambitious plan to develop the ₹40,000-crore Galathea Bay International container transshipment terminal (ICTT) project, in the Andaman and Nicobar islands, in a public-private partnership (PPP) framework. 

This month, the Ministry of Ports, Shipping and Waterways moved a proposal with the PPP Appraisal Committee (PPPAC) under the finance ministry. It calls for building the port in Design Build Finance Operate Transfer (DBFOT) mode, at least two senior officials told Business Standard. 

“The appraisal process is ongoing and currently at the inter-ministerial consultation stage. We have received comments from the finance ministry and NITI Aayog and are responding to concerns. The expectation is that the appraisal committee will meet on this soon and it will get its approval,” one official said. 

The ministry of ports did not respond to an email seeking comments on the project's development. 

State governments have bid out greenfield port projects to private players in the DBFOT mode, where private companies take the risk from the early stages. This includes the recently-operationalised Vizhinjam Port in Kerala, where the central government has predominantly used PPP at already-constructed ports for development of berths and terminals. 

The ministry earlier wanted to construct the port with government support and was appraising the project through the Public Investment Board under the finance ministry’s expenditure department, the second official said. 

It added that the project is routed now through the PPPAC in order to get more private investment. 

“Given the challenging location, it was felt that a private player would be more suited to develop it. It allows the freedom and efficiency to construct and operate the terminal optimally,” said the official. 

To counter risks to sustainability of the project through private investment, there is a clause for viability gap funding in the proposal. But a decision on its quantum will be made by the PPPAC, the official added. 

The project, which had faced environmental and legal challenges in the past — apart from concerns over displacement of the indigenous Shompen tribe and commercial viability — has been in the government’s pipeline for several years. 

“This has been aligned with other projects in the holistic development plan. Synchronisation of timelines is critical because a single project will not move forward without the others. The four projects are now ready for final approval,” the official said. 

Tenders are likely to be floated for these projects within this calendar year, the official added. The delay was due to the fact that several commitments for private players were based on completion and operationalisation of other projects. 

Great Nicobar island is only 40 nautical miles from the Malacca Strait international shipping channel, which supports around 35 per cent of the annual global sea trade. 

The ICTT project is planned to cater to the transhipment traffic from ports along the East Coast of Indian ports, Bangladesh and Myanmar as it is closer than Port Klang and Singapore. 

Currently, nearly 75 per cent of India’s transhipped cargo is handled at ports outside India. 

Colombo, Singapore and Klang handle more than 85 per cent of this cargo with 45 per cent handled at Colombo. 

Indian ports can save $200-220 million annually on transhipment cargo, according to government assessment.