Ports are racing to raise dollar loans

ports Jawaharlal Nehru Port Trust (JNPT, Navi Mumbai), V.O. Chidambaranar (Tuticorin), Kamarajar (Ennore), Paradip and Kandla plan to raise close to three-quarters of a billion dollars in external commercial borrowings.

After raising $400 million last year, JNPT is going for another dollar-denominated loan, said Rajive Kumar, shipping secretary. While the Ennore port is looking to raise around $100 million, JNPT and Tuticorin ports require around $300 million and $230 million, respectively, for dredging work, Kumar added. Kandla port is planning to raise $150 million.

This comes at a time when dollar loans are available at a low rate as compared to recent years. In addition, dollar-denominated borrowings bear a lower interest rate as compared to those on rupee loans.

Also, it makes sense for the Indian ports to leverage their dollar-denominated receivables from vessel-related charges such as port dues, berth hire and pilotage which can be utilized to provide a natural hedge against the dollar-denominated long-term funding.

The fund-raise plans come in the wake of the ₹8 trillion investment envisaged under Sagarmala until 2035. The Sagarmala programme involves the construction of new ports to harness the country’s 7,517km coastline and setting up of as many as 142 cargo terminals at major ports.

According to Kumar, the ports are working on pre-requisites before they can raise these loans. “The quantum (of loan) will vary port to port,” he said.

Ravi M. Parmar, chairman of Kandla Port Trust, said, “We plan to raise around ₹1,000 crore or $150 million and have appointed SBI Cap as our consultant. Kandla will be the third port in the country that will be raising external commercial borrowing after JNPT and Ennore.”

He added that SBI Cap, which is preparing the detailed project report for the port, will also identify the potential of various projects.

JNPT, which ships more than half the containerized cargo passing through India’s ports, raised $400 million from a consortium of Singapore’s DBS Bank Ltd and State Bank of India last year.

Vessel-related charges for foreign-going vessels are denominated in dollars but collected in rupees after applying the prevailing exchange rate, according to a practice followed since 1991.

Experts believe this may be a good time for the ports to go for dollar-denominated loans. “People are expecting that dollar will not appreciate. That’s the reason why dollar denominated borrowing rates are at a significant low,” said A.B.L. Srivastava, chairman, Almondz Global Infrastructure Consultants.

Queries emailed to the spokespersons of V.O. Chidambaranar, Kamarajar, Paradip and JNPT ports remained unanswered.

The government allotted ₹2.4 trillion for roads, railways and ports in 2017-18.