Kamarajar Port privatisation or IPO? Budget may tell

The Narendra Modi-led NDA government is expected to lay a road map in the upcoming Budget – whether to privatise Kamarajar Port Ltd or to go in for an initial public offering (IPO) of shares. It is the only Central government-owned port that is run as a company.

While NITI Aayog, the government think-tank under its former vice-chairman, Arvind Panagariya, had suggested 100 per cent sale of the government’s equity in the port company to a private entity, a section within the government favours an IPO, officials briefed on the discussions said.

The Central government owns a direct stake of 66.66 per cent in Kamarajar Port Ltd, while the nearby Chennai Port Trust, also government-owned, holds 33.33 per cent .

Kamarajar – a consistently profit-making and dividend-paying company – handled 30.02 million tonnes (mt) of cargo in FY 17, earning ₹620.14 crore. At 30.02 mt, the port operates at a capacity utilisation of 79 per cent.

The port company is implementing six capacity expansion projects to add 29 mt at an investment of ₹6,834 crore, Pon Radhakrishnan, Minister of State for Shipping, told Parliament on December 28. The capital expenditure will be funded through a mix of internal accruals, private funds and borrowings.

Kamarajar was the latest edition to the string of ports owned by the Union government. It was formed as a company under India’s Companies Act when it was opened for commercial operations in 2001.

Kamarajar follows the landlord port model, where cargo-handling facilities are developed with private funds, while the port authority invests in common infrastructure such as channel deepening/dredging, break water and rail/road connectivity. It was originally designed as a satellite port to Chennai Port Trust to handle dusty cargo such as coal and iron ore, but later diversified to cater to clean cargo, including containers.

Kamarajar began as Ennore Port Ltd to run the port at Ennore near Chennai, but was re-named as Kamarajar Port Ltd in 2014, after the late Kumarasami Kamaraj, a Congress leader from Tamil Nadu, and the State chief minister between 1954 and 1963.

The re-naming was carried out during the tenure of GK Vasan when he was the Shipping Minister in the UPA government headed by Manmohan Singh.

Kamarajar is free to set rates based on market forces, while the rates at the 11 major port trusts, run by the Central government, are set by the Tariff Authority for Major Ports (TAMP).

Last year, Kamarajar raised a dollar-denominated loan of $100 million from Axis Bank Ltd to part-fund expansion of the port.

Kamarajar will utilise the loan to construct a new coal loading berth for the Tamil Nadu government-run power utility TANGEDCO, a new general cargo berth, a new automobile export terminal with a capacity to handle 300,000 cars as well as for deepening the depth to handle bigger ships.