The Union government-owned V O Chidambaranar Port Authority, situated in Tamil Nadu’s Thoothukudi district, has received approval from the Public-Private-Partnership Appraisal Committee (PPPAC) to embark on the construction of a container terminal in the port’s outer harbor. This ambitious project, with a substantial investment of Rs7,055.95 crores, aims to establish a state-of-the-art container terminal with a capacity of 4 million twenty-foot equivalent units (TEUs).
In a separate development, an Empowered Committee has granted “in-principle” approval for a viability gap funding (VGF) of Rs1,950 crore for the project, according to documents reviewed by ET Infra. The “in-principle” nod for the VGF, recommended by the Empowered Committee, is pending final approval from Finance Minister Nirmala Sitharaman.
This project represents a significant departure from the conventional model followed by Union government-owned major ports. The selection of the private entity to execute the project will be based on the lowest VGF quoted, a departure from the previous practice of finalizing cargo handling contracts based on the highest royalty per TEU or per ton of cargo quoted by bidders.
The Union government is set to contribute Rs1,411.19 crore (20% of Rs1,950 crore) as VGF, while the Ministry of Ports, Shipping, and Waterways/VOC Port Authority will contribute the remaining Rs538.81 crore (7.64%).
The project, unfolding in two phases, will involve the construction of two container terminals, each with a berth (quay) length of 1 km and a capacity to handle 2 million TEUs. The first phase includes a 5,635-meter-long breakwater, a 3,200-meter-long rubble bund, a mechanized container terminal, capital dredging in the turning circle, and the installation of navigational buoys, all with an investment of Rs4,494.46 crore. The second phase comprises a mechanized container terminal and capital dredging alongside the berths to increase water depth to 18 meters, estimated to cost Rs2,561.49 crore.
Funding for the project will be a combination of equity (Rs1,531.78 crore in the first stage) and debt (Rs3,574.17 crore). The project is expected to yield a net present value of Rs646.86 crore (at a 12 percent discount rate), with the private investor’s net present value projected at Rs1,496.17 crore (at a 12 percent discount rate).
The project’s internal rate of return (IRR) is estimated at 13.19 percent, with equity IRR at 16.20 percent and economic IRR at 15.47 percent.
The private developer, once selected, will be contractually obligated to commence the second stage of the project after specific conditions are met, including cargo volume thresholds and timeframes.
VOC Port, currently the third-largest container handler among state-owned ports, is positioned to further enhance its capabilities with this strategic project. This development aligns with the port’s broader objective of becoming a transshipment hub, catering to gateway cargo and mainline vessels.
This project underscores the evolving vision of the VOC Port Authority, emphasizing the immediate focus on handling gateway traffic in the hinterland, gradually building capacity for future transshipment volumes. The viability gap funding of Rs1,950 crore sought for the project represents 27.64 percent of the total project cost, reflecting a strategic approach to cover essential capital dredging costs.
With the project awaiting environmental clearance, bids will be invited once the necessary regulatory approvals are secured, marking a crucial step towards the realization of this transformative endeavor.