With the ownership of Karaikal port set to change hands following the order approving the resolution plan of the Adani group by the National Company Law Tribunal, the government is exploring various options it has at its disposal to rework the 2006 concession agreement the territorial administration had entered with Marg Constructions Group of Companies, the developer and initial operator of the port.
The developer had taken a loan to the tune of ₹2,977 crore from various creditors, which it was unable to repay. Last year, the Division Bench of National Company Law Tribunal in Chennai had admitted the Karaikal port for insolvency proceedings based on an application filed by the financial creditor, Omkara Assets Reconstruction Private Limited
The Adani Ports and Special Economic Zone had participated in the Corporate Insolvency Resolution Process. The NCLT in its March 31 order had approved Adani’s bid to pay ₹1,485 crore to the financial creditors as upfront infusion amount.
“The proceedings went as per the Insolvency and Bankruptcy Code. We don’t know whether the acquisition process will be challenged in the court. As government, we have no role in the proceedings but now we can step in to protect our interests by pressing for a new concession agreement with Adani group. The Chief Minister has already communicated to the Chief Secretary to explore the scope for reworking the concession agreement we had with Marg in 2006,” a highly-placed government representative told The Hindu.
It was in 2006 that the then Congress government (the present Chief Minister N. Rangasamy was heading the government) signed a memorandum of understanding with Marg to lease around 600 acres of land to develop the port at Karaikal on a revenue sharing basis. The land was transferred for an initial period of 30 years with scope for extension.
As per the agreement, the developer was mandated to pay 2.6% of Gross Revenue as concession fee in four equal instalments based on annual revenue projection to the government. Any surplus or shortage should be adjusted with the instalments for the subsequent year and for the last year of the concession period within three months of the end date, the agreement said.
The agreement had also fixed a lease charge on an annual lease basis at the rate of 2% per annum of the fair market value of the land, which as on the date of their land acquisition in 2006, amounted to ₹2,17,299. Since the port commenced its operations in 2009, the territorial administration had received ₹133.45 crore as concession fee, lease charge and other taxes to the different wings of the government from Marg.
After the agreement was signed, the then government had come in for severe criticism for fixing a low lease charge and revenue sharing pact. The AIADMK had in the 13th and 14th Assembly session raised the issue of one-sided agreement entered with Marg. It had even sought a probe into the signing of the agreement. The party secretary, A. Anbalagan, said the pact was highly in favour of the operator.
Opposition leader R. Siva, who had questioned the acquisition process in the recently-held Assembly session, said Marg had duped the government by making a small investment. The agreement itself was full of loopholes and the people of the Union Territory did not benefit from it. “We are not approving the takeover of the port by Adani and will protest on the issue,” he told The Hindu.
Former Member of Parliament and economist M. Ramadass opined that after the transfer of ownership the old agreement has become irrelevant. On multiple factors, a new agreement counts better, he said. “A new agreement with the new owner has to be in place to confer mutual advantages to both the parties,” he added.
“Since the port started operations, it has added new cargo flows. The new owner has unveiled the plan to double the capacity of the port in the next five years and also add a container terminal. They also plan to invest ₹850 crore to upgrade the infrastructure. The rail connectivity given in post agreement period has enhanced the utility of the port. The industrial places of Tamil Nadu has got strategic linkages. All this calls for a new agreement,” he said.
The government should agree for an annual dividend of 10% of the total turnover of the port and employment for people in Karaikal port. The government should also ensure that students from Government Engineering College at Karaikal get training and job placements at the port, he added.