Finance Ministry thumbs down JNPT plan to raise Rs 1,600 crore from tax-free bonds

MUMBAI: The Finance Ministry has rejected an ambitious plan by country's largest container port Jawaharlal Nehru Port Trust (JNPT) to raise Rs 1,600 crore from tax-free bonds to fund the first phase of dredging at the port.

JNPT wanted to increase the depth of the port to 14 metres. The finance ministry said the port trust has enough reserves of its own for the activity.

"The project will go as scheduled. We will now go for a massive borrowing and finance a deal. I think it (cash reserves) is substantial to do the dredging, but I need much more than the cash reserves for the land which I am acquiring at Nhava", said L. Radhakrishnan, chairman, JNPT.

As part of its capex plan, JNPT planned to deepen and widen the ports channel and had sought the help of Japan International Cooperation Agency (JICA). But JICA approval was delayed till December and the company sought to raise tax-free bonds till that time.

The central government had allowed the issue of Rs 5,000 crore tax-free infrastructure bonds in the Union Budget in March this year for the port sector.

JNPT said it will look at awarding the bid for the dredging work by the end of this month. The second phase of the work will be done on a public private partnership basis, added the chairman.

The company was also planning to develop the land at Nhava to build a mega container terminal and a ship repair facility. "We had kept the reserves for the acquisition of land. We cannot raise money from outside only for the acquisition of land," added Radhakrishnan.

But officials at the port said the government had rejected the proposal because the port continues to be operated as a trust while other ports such as Ennore have become companies. "The Ennore port was allowed to issue tax-free bonds because it has become a company now. JNPT continue to be trust and the government rejected the proposal only because of this," said an official.

The shipping ministry has, meanwhile, said that it is still in talks with the finance ministry over the bond issue. "The finance ministry had rejected the bond issue citing adequate reserves with the port trust. But we are still pushing for the issue of bonds," K. Mohandas, secretary, ministry of shipping, said.

JNPT, plagued by congestion trouble and labour agitation over the corporatisation plan, is now planning to set up the fourth container terminal for about Rs 6,700 crore. A consortium of Port of Singapore Authority and ABG Infra have bagged the rights to set up the project. The port currently operates at 110% of its capacity and contributed to 56.5% of India's overall water transportation.