ArcelorMittal-Nippon plans to take control of captive jetty at Hazira

ArcelorMittal-Nippon Steel say that this was a captive licence for the steel plant and the captive jetty should remain with the plant

AM/NS — the joint venture in India of ArcelorMittal and Nippon Steel — is trying to take control of the captive jetty at Hazira in Gujarat from the Ruias of the Essar group.

AM/NS declined to comment on the issue but sources in the state government confirmed it had applied for a transfer of licence from Essar Bulk Terminal (EBTL), the majority in which is held by Essar. 

The move has been initiated by AM/NS on the reasoning that this was a captive licence for the steel plant and the captive jetty should remain with the plant. AM/NS India, formerly Essar Steel India (ESIL), was acquired by ArcelorMittal and Nippon Steel jointly last month, under the insolvency law, after a long tussle with the Ruias. However, ESIL’s assets in that deal did not include some ancillary units like a slurry pipeline, power plants and port facilities.

State policy

At the heart of the recent development is a change in the Gujarat Maritime Board’s (GMB’s) policy. In October, it announced a new policy framework, aimed at “unlocking value”, by allowing existing captive jetty holders to handle third-party cargo. 

More than two decades earlier, GMB had granted private companies the permission to construct captive jetties on a nomination basis, to cater to their import-export requirement. 

It is estimated Gujarat has  from 80 to 150 million tonnes per annum (mtpa) of unutilised capacity across 38 captive jetties along its coast. The new policy is aimed at easing the method of doing business for all 38 captive jetties, as it eliminates the need for case-to-case approvals to handle commercial cargo. The policy grants existing captive jetty holders the option to either opt-in or opt-out of this.  EBTL had opted-in, thereby requiring it to enter into a supplementary agreement with GMB. However, ArcelorMittal is opposing this.  

Contentions

A spokesperson for AM/NS said, “For jetties to be able to handle commercial cargo, port operators must bid for licences in open auction, which was not the case for the Hazira jetty, an inextricable feature of the steel plant from conception more than two decades ago.” Adding: “With EBTL’s cargo volumes set to grow as AM/NS India increases production over the coming years, any attempt by EBTL’s remaining shareholder to obtain commercial status would violate port regulations in the state. We, therefore, hope and expect that the existing long-term agreements governing EBTL continue and no changes to a jetty clearly designed for captive usage will be made without the explicit consent of AM/NS India.”

AM/NS India has indicated it would increase the steel plant’s annual capacity to 12-15 mt in the long term, from 7.5 mt now. As part of its application for complete licence transfer, AM/NS is also learnt to have raised doubts over its steel plant's captive requirement being met in the long run by EBTL. 

However, on its part, EBTL has assured it would meet this. An Essar Ports spokesperson said, “There will be no impact on captive cargo. We will continue to handle captive cargo as per the steel mill’s requirement and unutilised/surplus capacity of the terminal will be used for commercial cargo handling.”

He further added, “While EBTL as an independent company entered into an agreement with GMB and invested Rs 3,200 crore to develop the deep water port facility at Hazira, no material financial investment was made by the then Essar Steel in the development of this facility.”

AM/NS is understood to have said the licence for initial jetty and first extension were granted to ESIL but that during the process of the second captive jetty extension, a Special Purpose Vehicle (SPV) was set up by the Essar group, called EBTL, with ESIL a 26 per cent shareholder. 

Mukesh Kumar, vice-chairman and chief executive at GMB, told Business Standard, “Various representations from both the parties are under examination by the government.” As of this moment, the supplementary agreement between EBTL and GMB has been put in abeyance. The Gujarat government’s Chief Secretary Anil Mukim said, "We are examining the issue.” The Essar Ports spokesperson says commercial cargo prior to the new policy was handled by the company by obtaining case-to-case approvals. Of the 50 mtpa capacity at Hazira, the steel plant's cargo requirement is currently 24 mtpa. 

By opting-in under the new policy, EBTL intends to handle commercial cargo to make use of the surplus unutiliwed capacity, even as it is in the process of doubling the total capacity to 100 mtpa. “The Gujarat government’s New Port Policy is applicable to all 38 licences of captive jetties in Gujarat and will unlock surplus jetty capacities, enable further investments in the marine sector and reduce logistics costs in the economy,” the Essar spokesperson said.

EBTL, as a licensee, has ‘opted-in’ to the new policy and finalised plans to make substantial further investments at the port, he added.