Ports revival projects reach nowhere

By P. Venugopal

THIRUVANANTHAPURAM, MAY 26. Revival of the minor ports is one area where little has been achieved during the just-concluded tenure of the LDF Government.

The previous UDF Government, towards the end of its term, had taken a policy decision to encourage participation in the development of the minor ports in the State. Though the policy was pursued by the Nayanar Government also, the envisaged programme did not reach the stage where the work on reviving these ports could actually commence.

The only port where the matter had progressed beyond the procedural stage was the one at Beypore. However, even in this case, the work had to be stopped as soon as it began due to local issues.

Five minor ports were identified for revival in 1995. The selection was based on the potential the regions surrounding these ports had for industrial growth in the context of the plans to set up a chain of thermal power stations across the State.

Besides Beypore, near Kozhikode, the other minor ports identified for revival were Vizhinjam in Thiruvananthapuram district, Munambam in Ernakulam district, Thangasserry in Kollam district and Azhikkal in Kannur district.

The first one to be blue-printed was the Vizhinjam Port and the total cost of the project was then estimated to be in the region of Rs. 3,000 crores. As per the blue-print, Vizhinjam was perceived to be having the potential to be made a major container transshipment terminal because of its strategic location close to the international shipping route between the UK, West Asia and the Far East.

Further, it has the advantage of having a natural depth of 16 to 20 metres within one nautical mile from the shore and very low sedimentation in the surrounding seas, which are ideal factors for a port.

The previous UDF Government had signed a memorandum of understanding with the Kumar Energy Corporation for the development of the Vizhinjam Port and the setting of a 400 MW thermal power plant nearby. The Kumar Group then proceeded to link up a technical collaboration agreement with the Pembinam Radzai of Malaysia for the work on the port.

With Mr. A. K. Antony taking over as the Chief Minister from Mr. K. Karunakaran in 1995, the UDF Government decided against awarding such projects to private firms without competitive bidding. This turned to be a dampener for the Kumar Group initiative at that stage.

The LDF Government which came next took three years to get over its indecision on the issue. Finally the proposal was cleared in January 1999 by the State Cabinet, but, by then the Kumar Group's interest in the thermal plant had waned due to the difficulty in getting fuel linkage. By the end of the same year, the Government and the company signed a build-operate-transfer (BOT) agreement for the development of the port. However, things did not progress after that.

The Beypore port near Kozhikode had also gone through the same ordeal as the Vizhinjam port. The project included the establishment of an LPG storage and bottling plant by the promoter, Peevees Petroleum Products Ltd., in association with the multinational Mobil of the US.

The company signed the BOT agreement in March 1998 and though the work commenced soon enough, it came to a halt within months after the company had spent about Rs. 20 crore. The reason being cited is the stiff resistance put up by the local people who fear that the LPG installations will be a threat to the environment.

In January last year, the Government entered into a 25-year BOT agreement with Saurashtra Cements of Mumbai for the development of Munambam port near Kochi. The project includes the setting up of a cement clinker unit and the construction of a captive berth for handling and forwarding of the product. The work, however, is yet to start.

The Gujarat Ambuja Cement Ltd. had been after the project for reviving the Thangasserry Port for a pretty long time. But the company developed cold feet immediately after its proposal was cleared by the State Cabinet. It is yet to respond to the Government's invitation to sign a BOT agreement.

The new uniform sales tax structure for the States appears to be one reason for the slackening interest. The promoter companies were expecting sales tax reliefs and concessions from the Government to attract high volumes of business at the revived ports. No longer can a State adopt such measures.

The Azhikkal Port was linked to the Kannur Power Project and it was proposed to be developed by the promoters of that project. However, with the initiatives now being taken to have a gas pipeline from the proposed LNG terminal at Puthuvypeen to Mangalore, the viability of this port has become doubtful. With the execution of the gas pipeline, there will be no need for importing naphtha for the power project.

The new UDF Government will have to look into the factors impeding the development of minor ports case by case and prepare a time-bound plan for completing the projects which are still relevant. The question of how to surmount the issue of providing incentives to boost the business at the revived ports in spite of the State's commitments under the uniform sales tax regime will have to be addressed intelligently.

Actually, it is not the problem of funds which is proving to be the real bottleneck. The initiative expected from the Government does not involve any financial outgo since the projects are conceived under the BOT arrangement.

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