Shipping Ministry to seek VGF for two proposed major ports

Seeks support to cover the funding gap for two major ports

The Shipping Ministry will soon seek support from the Finance Ministry for covering the funding gap for two major ports proposed in West Bengal and Andhra Pradesh.

"If the IRR (internal rate of return) goes down to something like 8%, I don't expect people to bid too bullishly. So that portion has to be taken out, put on VGF (Viability Gap Funding). That is what I am trying to take to the Cabinet," Shipping Secretary Vishwapati Trivedi told reporters on the sidelines of a CII event here.

A Cabinet note on the subject is being prepared, he said.

The government has finalised Sagar (West Bengal) and Dugarajapatnam (Andhra Pradesh) as the two sites for setting up of the ports.

At Sagar, there is a proposal to build a rail bridge as well, which means that the rate of return for that port will about 8%.

At the Dugarajapatnam, the rate of return is 18% without the cost of land and therefore the Shipping Ministry is of the view that there is a need for VGF.

VGF is government support that is extended to those projects that are economically justified but fall short of financial viability due to their longer gestation periods or other factors.

Meanwhile, about the lack of capacity expansion in ports, Trivedi said: "There has been increase in investment in the non-major ports (not covered under the Port Trusts Act) and the new ports which are getting developed are based on the design of Corporate Ports and they will be handling a major chunk of water freight traffic in the future."

The government in 2013-14 fiscal (till January) had awarded as many as 30 port development projects under the PPP (public private partnership) mode, entailing total investment of Rs 2,07,089 crore.

The total capacity of these projects is 217.57 million tonnes per annum.