Government Eyes $2 Billion in Foreign Funds for Expansion of Major Ports

Source : Economic Times

The government is planning to raise nearly $2 billion (about Rs 12,400 crore) in overseas funding for expansion of major ports in the country as well as to execute rail and road projects to connect them to the hinterland.

The shipping ministry is likely to soon finalise the proposal for a dozen major ports that have a combined US dollar denominated income of about $400 million a year, officials said, adding that the plan will require the nod of the finance ministry and the Reserve Bank of India. “Ports are not hard pressed for money but we want access to cheaper funds. We can use our dollar denominated earnings as a security to raise more finance and it will be hedging for our funds as well,” a senior government official said. Most of the Rs 2.96 lakh crore investments envisaged in major and non-major ports by 2020 has to come from the private sector.

However, public funds will be required for activities such as image25deepening of port channels, and expansion of rail and road connectivity from ports to the hinterland. India allows foreign direct investment up to 100% under automatic route for construction and maintenance of ports.

For road connectivity projects alone, about Rs 27,000 crore is required. Some of the funds can also be used for financing the Rail Corporation, which is being set up with participation of all the 12 major ports, exclusively for building port connectivity rail projects. The shipping ministry is still in the process of deciding the mechanism of fundraising, the official cited earlier said.

“Getting access to cheaper overseas funds is a good idea since connectivity is a key issue for ports. Corporatisation of major ports at this point is important as it will make raising money much easier,” said Manish Agarwal, leader-capital projects and infrastructure at PwC India.

The shipping ministry is in talks with some foreign banks for extra commercial borrowing, officials said, adding that the ministry is also exploring the option of accessing long-term finance through pension funds.

During 2013-14, the ministry had awarded 16 projects amounting to an estimated Rs 18,640.83 crore under public-private partnership mode for capacity addition of 159.65 MT in the major ports.

The ports sector has the potential to absorb huge investments given India’s 7,500 km long coastline and plans to develop it as preferred route to transfer cargo to hinterland, a shift that will ease pressure on the road and rail resources.

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