A number of foreign companies have begun pitching for containerisation projects in the major ports since the charges in these venture is permitted to be levied in foreign currency equivalent.
The companies pitching for containerisation projects, include, Hutchison Whampoa of Hong Kong, Ports of Singapore Authority and P&O of Australia. The latter two are already in the process of construction of additional facilities in the Tuticorin Port in Tamilnadu and Jawaharlal Nehru Port in Mumbai. The Tuticorin project is estimated at about $1.2 billion, which includes development of a new outer harbour. In addition, these companies have shown interest for development of a container handling terminal at the Kandla port trust. All these project are for raising container handling capacity by about one million tonnes each.
These companies have also bid for a major containerisation project in the Chennai Port trust and bid for the Vallarpadam project falling within the Cochin Port Trust. The Vallarpadam project costs have been estimated tentatively at $700 million and the Chennai port project at around Rs 100 crore.
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The interest in such projects has come after, the Tariff Authority for Major Ports permitted levies in dollar equivalents for such projects two months ago. The Tariff Authority for Major Ports said containers would be treated as part of the vessel hatch and charges would be treated as vessel charges. This is in line with international practice. This also means that the tariffs for ports' existing container handling facilities would now be denominated in dollars. In fact this practice has already begun in the Mumbai Port Trust and is expected to be adopted by all the remaining 10 port trusts soon, official sources said.
However, this does not mean that all container related charges will be permitted in foreign currencies. Only the handling charges will be levied in foreign currencies, whereas charges relating to stuffing and de-stuffing of containers would still be levied in domestic currencies.
Sources said such partial levies had allowed foreign investors to eliminate the costs of hedging for protecting their rates of return on investments. Besides such projects have also now become more amenable to funding through external commercial borrowing, since a major portion of the earnings will be in foreign currencies.
Foreign investors have been looking for dollar rates of return of more than 12 per cent for such projects. Currently the Tariff Authority for Major Ports permits tariff calculation on the basis of an 18 per cent return on capital employed on port projects, which comprises of a 12 per cent return on equity and six per cent on a replacement renewal reserve.
Official sources said in addition to container charges, the surface transport ministry had once again approached the Tariff Authority for Major Ports for denominations of all cargo related charges in foreign currency. This was disallowed by the authority early this year.