Shipping ministry wants to raise more funds

JNPT, India’s largest container port, is all set to pilot a new infrastructure financing strategy of leveraging dollar denominated income to raise funds for expansion.

Yes Bank is advising the port in this exercise. Dollar borrowings had landed many Indian companies in trouble after rupee depreciated sharply.
Companies that have dollar earnings can raise cheap foreign funds that they can service from earnings without worrying about exchange rate fluctuations. The natural hedge will keep cost of funds low. “Once we have gone through this cycle we will have a better idea of how to go about it in a bigger way,” a senior government official told ET.
With infrastructure financing becoming a big issue for the government, the shipping ministry is drawing up a plan to raise about $2 billion (about Rs 12,500 crore) for rail and road connectivity projects through its dollar denominated income.

The income of major ports in dollar denomination is around $400 million and the shipping ministry intends to raise funds four to five times the available money.

“A part of our earnings is through dollar denominated tariff. This income is naturally hedged and can help us attract better loans,” said JNPT chairman NN Kumar.

Major Ports have identified a shelf of nearly 40 projects, including the last mile connectivity projects and internal port rail projects that require an estimated investment of Rs 2,372 crore. For road connectivity projects, about Rs 27,000 crore are required.

“The challenge we are facing is not so much of finance but the cost and tenure of funds available to us. Infrastructure cannot do with eight-ten year loans, we need around 20-25 year long debt at a cheaper interest rate,” another senior official said.
The special purpose vehicle to provide efficient rail evacuation systems to major ports received the Cabinet nod last week. The new company set up as joint venture between the shipping and rail ministries will also use the funds to be raised through the port earnings.

The shipping ministry has written to finance minister Arun Jaitley to be included in the Rs 20,000 crore infrastructure fund announced in the budget for 2015-16 to get access to more resources. The government has also circulated a Cabinet note for corporatisation of the 11 major ports trusts in order to make their functioning more professional. Jawaharlal Nehru Port Trust (JNPT ) and all the other port trusts recently got enhanced financial powers as part of this endeavour.

Port trust