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'Ease ECB norms, allow MAT recoup'


February 12, 2013
ease_ecb_norms_allow_mat_recoup_rajiv_agarwal_essar_ports.jpgThe scenario in the ports sector does not seem to be encouraging future investments. The industry is not looking at some push from the government to meet targets. Rajiv Agarwal, CEO and MD of Essar Ports, spoke to R N Bhaskar and Yuga Chaudhari about expectations from the upcoming Budget. Excerpts from the interview:

How do see the current scenario in the Indian ports sector?
If you look at the ports sector, India today has a capacity of 1,100 million tonne (mt) and the utilisation is about 900-950 mt. As per the government projection, by 2020 we will have a capacity of around 2.5 billion tonnes. This will be possible if we grow at a compounded annual growth rate of 8.5%. The last few years have been slow and if we do not grow fast in the next few years then this target could get pushed further. If you look at the way we are growing, we are not sure whether this target can be met. About Rs 280,000 crore is required to build this capacity, it is not very large if we look at the investments in some of the other sectors.

Is it because we have not created the required infrastructure?
We have not created the infrastructure. We have to first create infrastructure. In India we do it reverse. Creating infrastructure first we will create growth. We need to give out concessions, see to it that we are not caught into the problem of high bidding. Some of the projects in the past which had high bidding have either not taken off or not doing well, and in many case the euphoria has come down. The present infrastructure is 60% of major ports and 40% non-major ports, and most of it is at a low level of mechanisation and poor connectivity. So the efficiency levels are low. And just by improving these aspects you can get an overall capacity and business. We have ports under the central government as well as states. The central government has major ports and these are regulated by the Major Ports Act. They have tariff control, PPP projects, while states give out new concessions. The success of some of the private ports has also caught the attention of investors and banks and they understand the requirement and opportunity in this sector.

What incentives should the Budget offer?
The government should look at the interest side. Worldover the interest rate scenario is very soft. In India we are paying 13-14% for a new project. So we want external commercial borrowing norms to be eased. Second is if they can allow the MAT to be recouped for further expansion, it will help -- something like investment allowance. The regulated tariff structure should be looked into it.

Coming to Essar Ports, how do you plan to increase non-captive business? 
In 3-4 years non-captive business will grow from the current level of 3% to 25%. So business is there, coal is one of the large commodities we are looking at. Apart from that we are looking at liquid -- crude and petroleum products. Then other opportunities such as chemicals, container and ro-ro (roll on, roll off).
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