Vadhavan Port: Japan International Cooperation Agency Expresses Interest In Funding Rs 76,000 Crore Project Near Mumbai

The Japan International Cooperation Agency (JICA) has initiated discussions with the Jawaharlal Nehru Port Authority (JNPA) regarding financing for the ambitious mega port project proposed at Vadhavan in Maharashtra.

This marks the second major institution to express interest in backing the project, according to a senior official. Previously, the state-owned lender Power Finance Corporation Ltd (PFC) had offered to underwrite the entire debt amounting to Rs 27,283 crore for the construction of the port.

The Rs 76,220 crore container port project is a joint venture between Jawaharlal Nehru Port Authority and Maharashtra Maritime Board. The envisioned port is designed to handle approximately 298 million tonnes (mt) of cargo annually, including 24.5 million twenty-foot equivalent units (TEUs).

In April, representatives from the JICA India office engaged in preliminary discussions with Unmesh Wagh, Chairman of JNPA regarding potential funding for the project.

Wagh stated, "The structure devised by JNPA for project implementation and the promising prospects of the new port has attracted the interest of JICA." He highlighted meticulous planning, comprehensive clearances, and robust financial projections spanning three decades as key factors stimulating interest among potential lenders, reports Economic Times.

Moreover, Wagh emphasised the substantial potential of public-private partnerships (PPP) within the port terminals, envisioning rapid self-sufficiency for the new port, which in turn has garnered attention from financial institutions.

The project's progression hinges on cabinet clearance, anticipated following the formation of a new government after the upcoming elections in June.

The development of the new port falls under the purview of Vadhavan Port Project Ltd, a joint venture between JNPA (holding a 74 per cent stake) and the MMB (with a 26 per cent equity share). The project will be executed in two phases under the landlord model, adhering to government policy guidelines.

Under this model, the joint venture company will undertake the development of essential port infrastructure, while cargo handling facilities will be outsourced to private entities.

Key infrastructure, including breakwater, dredging, rail and road linkages, power supply, and water supply lines, will be developed. Various government bodies, including the Ministry of Railways and the Ministry of Road Transport and Highways will make external connectivity investments totalling Rs 5,002 crores.

The project will be financed through a 70:30 debt-equity ratio, with JNPA and MMB providing corporate guarantees. The debt, estimated at Rs 27,283 crore, will be arranged progressively over the project's execution phases.

Multiple financing avenues, including bank loans, non-convertible debentures (NCDs), and external commercial borrowings (ECBs), will be explored to optimise financial arrangements.

Officials underscored the robust financials of JNPA and the debt-free operations of Maharashtra Maritime Board, which are expected to bolster equity and debt-raising efforts. JNPA's project execution capabilities and experience further instil confidence in the timely realisation of the port project.

Vadhavan: A mega port near Mumbai

The Union Cabinet, chaired by Prime Minister Narendra Modi, in February 2020, had approved setting up Vadhavan Port under the Sagarmala Programme.

Situated in the environmentally sensitive Dahanu taluka within Maharashtra’s Palghar district, Vadhavan Port boasts a natural draft of approximately 20 metres near the shore.

This feature makes it well-suited for accommodating larger container vessels ranging from 16,000 to 25,000 twenty-foot equivalent units (TEUs), offering the benefits of economies of scale and contributing to the reduction of logistics costs.

The Jawaharlal Nehru Port Trust (JNPT) and Mundra, the two largest container handling ports in India, can handle only mid-size container ships as they have drafts of 15 metres and 16 metres, respectively. However, in comparison, the world's largest container ports require deeper drafts of 18-20 metres.

As container ships continue to increase in size, it becomes essential to develop a deep draft container port on the west coast of India to accommodate these larger vessels. The proposed port in Maharashtra is anticipated to have a capacity of over 23 million TEUs by 2040, positioning India among the top 10 container ports globally.

Additionally, the construction of the greenfield port at Vadhavan is crucial for managing overflow traffic due to limitations on expansion at Nhava Sheva, where JNPT is situated.