Defence ministry nod to ease Tata Steel's Subarnarekha port acquisition

The project proposed at Subarnarekha needs 1,215.43 acres of land for the port area

The Defence ministry is on the verge of granting conditional approval for development of the Subarnarekha port off the coast of north Odisha. The nod is expected to overcome a major hurdle for Tata Steel that has announced to acquire a majority stake in the port project. The steel maker has signed a definitive agreement with Chennai-based Creative Port Development Ltd (CDPL) to pick up 51 per cent equity in the port project from the original promoters.

“The Defence ministry, particularly the Defence Research Development Organization (DRDO) had been opposing many minor port projects along the coast of north Odisha. The identified port sites were close to their missile testing facility near Chandipur. For the Subarnarekha port, the Indian Air Force had certain objections as their practice limit zone fell under the port limits. But, after discussions with the defence ministry officials, the row is almost settled and we are awaiting a formal approval”, said an Odisha government officer.

Defence secretary Sanjay Mitra had negotiated with the Odisha chief secretary Aditya Padhi to settle the issue. Padhi is understood to have suggested a formula where the operations of the Air Force and the port project can go hand in hand. Later, Padhi followed it up with a meeting in New Delhi to clinch the deal in favour of Odisha's port sector development.

CPDPL, promoted by two technical entrepreneurs, Ramani Ramaswamy and Ramaswamy Rangarajan, had entered into a concession agreement with the Odisha government in January 2008 to develop the Subarnarekha port as an all-weather deep-draft facility.

The port project proposed at Subarnarekha needs 1,215.43 acres of land for the port area and 1,565.93 acres for the rail corridor. Out of 1,215.43 acres of land needed for the port area, 158 acres constitute Gochar land, 193 acres Bhudan land, 138 acres of encroached land and the remaining 724 acres being free land.

The original cost of developing the port project was pegged at Rs 2,345 crore but an assessment by the state government shows that the revised cost could go up to Rs 4000 crore.

For Tata Steel, the port is expected to address its strategic needs in the future. Besides, its strategic location makes the port attractive to structurally enhance the competitive position of Tata Steel's India operations, especially its greenfield Kalinganagar project in Odisha. The steel maker, however, has stated previously that the acquisition and development is subject to certain conditions precedent, detailed technical assessments and financial closure.