Port Developers Can Raise Loans Against Project Assets

Private developers had complained of difficulty in raising loans from FIs, since private participation under the new port policy is allowed on a build-operate-transfer basis and ownership of land and waterfront stays with the government. FIs do not prefer leased property as collateral security.

Surface transport secretary S Sundar yesterday assured a seminar organised by the Confederation of Indian Industry on Ports-Vision 2002 that the ports have been asked to permit the private developer to create a charge on the assets of the port project for raising loans. The superstructure on land and the waterfront can be hypothecated as security against loans.

 

If the FIs do not agree to this provision, sources said, the government may consider making the port licences transferable so that they can be offered as primary or additional security against loans.

It was emphasised at the seminar that the 11 major ports will be required to handle 360 million tonnes by year 2001-02, according to the ninth plan working group on ports. The ports handled 213 million tonnes in 1995-96. So all possible stimulus needed to be given to private developers to meet the target.

Pankaj Jain, director (ports) in the surface transport ministry, said the ministry has sent a proposal to the commerce ministry for 100 per cent waiver of the duty on import of port project equipment. The present duty level is 25 per cent.

The waiver has been sought only for the construction period, generally two-three years. After that, the equipment may be sent back or retained in the project premises. But full duty will have to be paid if it is moved out of the project premises on sale or consideration.

Jain said the surface transport ministry has recommended to the industry ministry automatic clearance up to 74 per cent of foreign equity investment in the port sector. Sources said the industry ministry is sending a note to the cabinet in support of the proposal.

The guidelines on setting up of captive ports will be revised to facilitate investment by joint ventures, Jain said.

He said the issue of simplification of custom procedures had already been taken up with the revenue ministry and a team from the European Union had arrived to study the position at the Kandla and Jawahar Lal Nehru ports.

Jain expressed the view that the two Port Acts of 1908 and 1963 needed to be integrated.

The surface transport director ruled out a single-window system for small ports, although he stressed that rapid development of the minor ports was necessary so that they could handle at least 25 per cent of the traffic by year 2010. He said the ministry has empowered the ports to take spot decisions on investment up to Rs 50 crore for new projects and up to Rs 100 crore on replacement projects, against the present sanctioning authority of up to Rs 3 crore. The government is also giving more autonomy to port authorities.

Maharashtra waterways commissioner R R Sinha said the state had decided to pick up equity up to 11 per cent in private port projects to instill confidence among the entrepreneurs. He said the maritime states should have full authority on environmental clearances for port projects.

Tamil Nadu state port officer I V G Prasad said private developers should be given a free hand in fixing the port tariff which would be regulated automatically by market forces.

CII port sub-committee chairman N Parikh said the chamber was against any ceiling on foreign investment in terms of equity or loan. CII has suggested that dividends, interest or long-term capital gains of individual investors be exempt from income tax and the present tax holiday for five years be raised to eight years.

It has further recommended the constitution of an autonomous national port development authority and setting up of maritime boards by all maritime states.

Highlights

Government allows private developers of ports to create a charge on assets built on land and waterfront for loans from financial institutions.

Private port project licences may be made transferable so that they can be offered as additional collateral security to FIs/banks.

Proposal on automatic clearance for up to 74 per cent foreign investment being sent to the cabinet.

Proposal for 100 per cent duty waiver on port project equipment during the construction period.

No single window clearance for minor ports.

Guidelines for captive ports to be revised to facilitate joint venture port projects.

Ports allowed to take investment decisions up to Rs 50 crore for new projects and up to Rs 100 crore for replacement projects, against the present ceiling of Rs 3 crore.