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Chennai Port Acquires 100 Percent Stake in Kamarajar Port

Chennai Port Chairman, Shri. P.Raveendran, IRTS


Port Wings News Network:

Chennai Port Trust (ChPT) on 27 March 2020 acquired 67% stake of its subsidiary Kamarajar Port Ltd. (KPL) for ₹2,383 crore, according to The Hindu report.

“This agreement comes into force with immediate effect,” said P. Raveendran, chairman, ChPT. “Our immediate focus is to utilise the existing capacity in ChPT to the maximum and carry out expansion in KPL. Our next target is to achieve cargo handling of 100 million tonnes in the coming years.”

Soon after remitting the amount, he said that both the ports would operate as different entities for the betterment of exim trade. KPL as corporate firm and ChPT as trust.

Both the ports would be in a better position to tackle competition from private players such as Adani’s Kattupalli Port and Krishnapatnam Port.

“Our combined effort will be to maximise cargo throughput. For the past few years, ChPT has been handling over 50 million tonnes of cargo, while KPL about 35 million. It will take at least two to three years to reach 100 million tonnes of cargo, due to COVID-19,” he said.

“In ChPT, we can’t go in for expansion due to thick population, traffic bottleneck and Madras High Court ban on handling dusty cargoes such as coal and iron ore. KPL is already handling coal. Efforts would be made to speed up Chennai Port-Maduravoyal elevated corridor project. Rail connectivity is there for both the ports. Rail lines are being doubled at KPL,” he said.

Asserting that both the ports were owned by Central government, he said that KPL would continue to function as a corporate firm and ChPT as Trust. There would not be any changing in quick decision-making pattern of KPL or in fixing tariffs.

“Kamarajar Port employs about 100 people and ChPT about 3,900. The utmost aim of the port is to safeguard employees interest. We will not transfer people from one port to another. KPL has outsourced some of its services. We will utilise them to tackle competition from private players,” he said.

ChPT has capacity to handle 100 million tonnes of cargo, while KPL about 67 million tonnes. The latter has eight operational berths and a few are getting ready. Both the ports have deep draft of 18 metres.

Asked about the car exports, he said that they were the only ports to handle car exports from South. During 2019, KPL and ChPT handled over 3.50 lakh units and this was bound to increase with the commencement of exports by Kia Motors.

The Story Behind Kamarajar Port:

Kamarajar Port was developed from a green field situation in the East Coast of India at about 20 km to the north of Chennai Port. The port was declared as a Major Port in March 1999 and incorporated as a company (Ennore Port Limited) in October 1999. The Port was commissioned in June 2001 with two dedicated coal berths with 15m alongside draft and since then handles thermal coal for the power stations of TANGEDCO (formerly TNEB). The Port has since then developed terminals through private sector participation to handle liquids, coal, iron ore and cars. In February 2014, the port was renamed as Kamarajar Port Limited.

With the presence of 11 major ports across the country, Kolkata, Paradip, Visakhapatnam, Chennai, Tuticorin, Kochi, Mangalore, Mormugao, Mumbai, Navi Mumbai (Jawaharlal Nehru) and Kandla (Deendayal), the port at Ennore started functioning. While all existing ports are operating in accordance with the Trusts Act, only the Kamarajar Port is based on Companies Act and act as corporate. The Union Government owns 67 per cent of the port and the Chennai Port holds the remaining 33 per cent. About 1,300 acres of land has been provided by the Government of Tamil Nadu for the establishment of the port. About 800 acres of land belonging to the Salt Board of the Government of India has been provided to the port at a lower price for construction facilities outside the port. The current total land area of ​​the port is about 2,700 acres. Established to handle around 30 million cargo annually, the port has now grown to handle 90 million tonnes of cargo. Over the next five years, construction projects are underway to handle approximately 145 million tonnes of cargo. When GK Vasan was the Union Minister for Shipping in 2014, the name of the port was changed to Kamarajar Port Limited.

Regarded as Model Port Under Union Government Control:

The port currently has 11 yards/terminals for handling coal, iron ore, natural gas, offshore liquid, cars and containers. The current market value of the port, which started with a direct investment of about Rs 300 crore, is said to be approximately Rs 30, 000 crore (including land, investment and capacity value). Over the past six years, the port management has paid about Rs 400 crore to Union Government as dividend amount. In addition, the port has paid about Rs 800 crore as taxes and other fees to the government. Kamarajar Port, which handled 34 MT cargo in 2018-19 period and earned Rs 710 crores as revenue, is said to be equipping herself for handling 145 million tonnes of cargo in next few years. It may be noted that the Union Government had announced that Kamarajar is a “role model for all ports” that have yet to be announced.


Chennai Port Takes Full Ownership of Kamarajar Port:

With the Union Government planning disinvestment to meet fiscal needs, the Department of investment and public asset management (DIPAM) announced strategic disinvestment of GOI stake of 66.67% in Kamarajar Port Ltd.

The proposal was approved by the Prime Minister’s Cabinet Committee on Economic Affairs on 28 February. Subsequently, two private companies were engaged by the government to finalize valuation of the port’s assets and value for eventual sales. Accordingly, it was finalized that the total value of Kamarajar Port as Rs 3,560 crore and the Union government’s shares of 67 percent is estimated at Rs. 2,380 crores. Chennai Port, which has 33 per cent stake in the port from the beginning, now become a wholly owned subsidiary of Kamarajar Port after buying the remaining 67 percent from the Union government.

Recently, DIPAM completed strategic disinvestment of GOI stake of 66.67% in Kamarajar Port Ltd in favour of Chennai Port Trust at a consideration of Rs 2,383 crore.

When all the formalities are completed, Chennai Port will provide the Government’s share of Rs 2,380 crore to the DIPAM

Future of Kamarajar Port?

Shri S. Velumani, former CMD of Kamarajar Port

Commenting on the sales and future of the port, Shri S. Velumani, former CMD of Kamarajar Port, said: “I don’t understand why the government sold its shares in Kamarajar Port, which continue to be profitable through private investments and the only port which is likely to earn multiple returns in the future. Kamarajar Port has paid more than twice the amount invested by the Union Government and Chennai Port as dividend. Moreover, the Chennai Port has been facing revenue crunch for the past few years due to various reasons. In this case, the port must raise Rs 2,380 crore with the help of reserve fund in the bank to buy these government’s shares. This amount is not going to help the Union government in any way. If the government indeed needed funds, they could have taken the stock market route to raise fund. The deal not going to benefit anyone – Union Government, Kamarajar and Chennai ports. Therefore, I assume that the profits from Kamarajar Port will be used to cover the financial shortfall of the Chennai Port. Kamarajar port is making huge profits with low investment and low number of employees. Single management will come into effect by bringing it fully under the management of the Chennai Port. The growth of the Kamarajar port will surely be affected. It is true that the future of this port is in question.”

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