In an interesting twist to the now controversial Vadarevu and Nizampatnam Port and Industrial Corridor (Vanpic) project, the Andhra Pradesh (AP) government has managed to secure the promise of restoring the original shareholding of its Indian partner in the project from the government of Ras Al Khaimah (RAK) with which it had entered into an MoU in March 2008.
Matrix Enport Holdings Private Limited, whose promoter Nimmagadda Prasad was remanded to police custody yesterday in the ongoing CBI case against the alleged quid-pro-quo dealings of Kadapa MP YS Jaganmohan Reddy, had sold its majority equity in the Vanpic Ports Private Limited, the special purpose vehicle (SPV) formed to develop the project, in favour of Navayuga Engineering Company Limited,
Navayuga, one of the leading infrastructure companies in AP, is the Krishnapatnam Port operator as well as the lead partner in the consortium that was selected for the development of the Machilipatnam port. Had this change in Indian partner continued, Navayuga would have controlled almost half of the AP coast line.
It all started when RAK had requested the Indian government some time back to impress upon the state authorities to speed up the clearance processes for the project, which was by then kept in a cold storage by chief minister N Kiran Kumar Reddy’s office.
AP’s infrastructure and investments (I&I) department had shot back at the foreign entity, questioning the unilateral dilution of equity and change with regard to the local partner without the government’s consent.
“First, they justified the Matrix’s share transfer to Navayuga terming that it was well within the mandate. As the I&I department stuck to its guns citing the same MoU conditions, RAK returned with a changed stance by informing the state government that it would restore the shareholding of the original Indian partner,” a senior government official told Business Standard on condition of anonymity. According to the official, Matrix now holds only 6 per cent stake in the port SPV.
While this has been happening at the administrative level, either for setting things right before giving a go ahead to the Vanpic project or for buying time as the project had already become a subject matter of controversy in the aftermath of the CBI investigation, the likely restoration of shareholding in favour of Matrix Enport Holdings at this juncture raises new questions as its promoter is accused as a beneficiary in the alleged quid-pro-quo deal.
It means practically nothing, except for saving Navayuga from any possible trouble, sources said.
On the other hand, the remand report filed by the CBI in connection with the arrest of Nimmagadda Prasad revealed that the then officials of the I&I department had, in fact, facilitated the dilution of equity of RAK, the project developer, to 26 per cent from the original 51 per cent. The CBI counsel, while arguing for police custody of Prasad yesterday, maintained that about 65 per cent equity is now held by Navayuga alone.
According to the remand report, the concession agreement permits dilution of equity only for five years after commencement (agreement) date, which has also been questioned by the CBI as the similar clause in other port projects indicated the commercial operation date as the starting point. Even going by the agreement, the equity dilution comes very early as the concession agreement was signed only in July 2008.
When the government was objecting to the equity dilution, the Navayuga company had written a letter to RAK last year, after the Vanpic project became the subject matter of investigation, that it want to exit from the project as the conditions had changed from what it were when it joined the project. It had also asked RAK and Prasad to refund the amount paid towards its equity in the project, according to sources in the know.
A senior official of the Navayuga group, when contacted, has neither confirmed nor denied this development. Officials in the government, however, maintained that all that mattered to them was restoration of the originally-agreed shareholding position in the SPV.
With a long-drawn court battle ahead for Matrix Prasad, it is not clear whether his company remains or continues with the project, the fate of which also currently appears uncertain. The Vanpic project was proposed to be developed in an extent of 28,000 acre under port and industrial corridor, by far the biggest conceived in AP by the YSR government.
Some important bottlenecks with regard to Nizampatnam, one of the two ports proposed to be developed under this project, also came to light afterwards, said industry department officials.
“Nizampatnam was already found not suitable for port development as the area is fully surrounded by mangroves among other problems. Therefore, a proposal to set up a nuclear power plant at this location is also being examined parallelly,” a senior official in the industry department told Business Standard.
