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The shipping ministry will seek Cabinet approval for waiving penal interest on government loans to the Cochin, Paradip and Visakhapatnam port trusts. The Cochin Port Trust (CPT) had sought a waiver of penal interest during the UPA regime. Similar requests by Paradip Port Trust (PPT) and Visakhapatnam Port Trust (VPT) have been sent by the shipping ministry to the Principal Accounts Office.
The Cochin Port's outstanding principal is about Rs 258 crore and the penal interest on it has grown to about Rs 729 crore over three decades. After making a mandatory provision of 0.25 per cent, which the defaulter has to pay, the port has asked for a waiver of penal interest to the tune of Rs 715.34 crore. Port trusts borrow from the Centre to develop and upgrade infrastructure and the loans unless repaid on time trigger a penal interest.
A Cabinet note is being drafted for the Paradip and Visakhapatnam ports, while the penal waiver request from CPT has been forwarded to the Planning Commission. The cabinet secretariat, finance ministry, Department of Industrial Policy & Promotion, Planning Commission and the Prime Minister's Office will also weigh in on the proposal note before it gets approved.
The shipping ministry and Paradip and Visakhapatnam port trusts differ on how much they owe the government. When loans are availed from the shipping ministry, the tranches of interest thus repayable are appropriated first to the penal interest due, then to the normal interest applicable and finally the borrowed principal.
PPT and VPT have reimbursed the principal amount along with some additional interest, according to a ministry source. "However, the deliberation is about the amount due under the bracket of penal and normal interest, and whether it can be waived off," said the official from the ministry of shipping, "and we will take a call after the Principal Accounts Office reconciles the figures."
Despite repeated calls and emails, officials from Paradip and Vishakhapatnam ports did not respond to Business Standard questions. CPT's total outstanding debt will be Rs 528 crore if it receives a waiver, which will be frozen, thus repayable, over a period of more than 15 years. "Since CPT has defaulted, our credit-worthiness has suffered. Once this debt is restructured, we will go for a fresh credit rating review," said a top official from CPT, requesting anonymity.
Multiple issues have plagued CPT. The International Container Transhipment Terminal (ICTT), built to wean away the dependency on Colombo Port for transshipment, is performing at 35 per cent of its total capacity. While the costs of dredging have mushroomed to enable larger vessels to dock at ICTT, the revenues generated have been paltry even after cabotage relaxations. "The Petronet LNG terminal's pipeline has also not been fully laid yet, so revenue has suffered. We are certain that we will be profitable when these two problems are sorted out," said the CPT official.
The overall amount of the penalty waiver that can result could potentially be upwards of Rs 1,000 crore and nearing Rs 1,500 crore. Whether that will set a precedent for interest waivers for future governments, only time will tell.
PORTS IN TROUBLE
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Cochin Port Trust faces penal interest of Rs 729 crore on principal amount of Rs 258 crore
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Paradip and Vishakhapatnam ports have also approached ministry for penal interest waiver
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Note being drafted for Paradip and Vishakhapatnam ports
- Note forwarded to Planning Commission for Cochin port
