How Vedanta’s Goa port modernisation spurred a dubious Sagarmala investment

Goa's Mormugao Port, near the town of Vasco da Gama, has been at the centre of controversies over its attempts to shift its product profile from iron-ore to coking coal. Dinodia Photo
10 December, 2018

On 25 March 2015, the union cabinet approved the Sagarmala programme— a flagship initiative of the Bharatiya Janata Party-led government, aimed at modernising India’s ports. The programme is expected to spur port-led economic growth by reducing logistics costs and encouraging port-oriented industrialisation. The following year, in July and August, the government finalised detailed master plans under Sagarmala for 12 of India’s major ports. This included the Mormugao Port Trust, or MPT, a major port near the town of Vasco da Gama, in Goa. Based on detailed assessments of the nature and quantities of cargo that the port can expect to handle by 2035—the target year for achieving Sagarmala’s objectives—the master plan for MPT recommended changes to the infrastructure and the facilities at the port in line with these projections.

However, my investigation into a port expansion project at MPT, envisioned under Sagarmala, indicates that the project is not backed by economic rationale. The project is barely viable as it will not serve any future growth in cargo and merely replace the existing facilities of the port, which presently appear sufficient for cargo growth up to 2035. The MPT’s attempt to couch the proposal as a project beneficial for fishermen has also been shot down by the community, many of whom say that it threatens the livelihood of traditional fisher folk. Fishermen along with local activists also claim that the project will cause irreparable damage to the regions’ ecology. The master plan and other port documentation reveal that the project has been justified for the sole purpose of clearing space at the port for the mining conglomerate Vedanta Resources to build its proposed coal and iron-ore terminal.

In April 2016, four months before the Sagarmala master plan was finalised, Vedanta Limited, a subsidiary of Vedanta Resources and one of the largest natural resources companies in the world, emerged as the winning bidder for a Rs 1,200-crore project at MPT. Its Design, Build, Operate, Finance and Transfer (DBOFT) project was slated to convert three of MPT’s eight active berths—designated spots in ports and harbours where vessels can dock or moor for loading and unloading—into a single terminal for iron-ore, coal and other dry bulk-cargo.

The berths identified for redevelopment under the Vedanta project were the petroleum handling facility at berth number eight, a 38-year-old iron-ore loading facility at berth nine and nearby barge berths. Notably, while berth nine and the barge berths needed to be upgraded, this was not the case with berth eight. For the year 2016, berth eight was handling 0.6 million tonnes of Goa’s annual domestic fuel demand of 0.78 million tonnes and was essential for the state. Inexplicably, its handing over to Vedanta for conversion to a dry-cargo bay happened without any plan put in place for the future of petroleum operations in the state.

Now, the MPT is proposing to undertake its biggest expansion yet, as a fait accompli to the Vedanta project. Under Sagarmala, port authorities planned to build three new berths—one liquid cargo berth; one multipurpose coastal cargo berth, for vessels carrying cargo from other Indian ports; and a multipurpose cargo berth, for all kinds of vessels. A fishing jetty and a passenger jetty have also been proposed on the other side of a concrete platform that will support the liquid and coastal cargo berths. The entire cost of this upgrade was pegged at Rs 680 crore.

However, due to space and financial considerations, the MPT decided to execute only the liquid berth, with the fishing jetty, at an estimated cost of Rs 136 crore. Though this expansion project is based on recommendations in the Sagarmala master plan, and is using funds from the scheme, a number of project documents suggest that there is little economic or technical reasoning justifying this expansion.

The Sagarmala master plan has justified the expansion based on its estimates of a major increase in liquid-cargo handled at MPT. The plan projects that liquid-cargo handling at MPT will rise by 70 percent in the next two years to 1.7 million tonnes in 2020, then to more than 2.3 million tonnes in 2025 and cross 4 million tonnes in 2035. Of this, petroleum cargo will comprise almost 2.3 million tonnes in 2035, according to the master plan’s figures. The new berths have been proposed to handle bulk liquid-cargo. A majority of the cargo includes petroleum, oil and lubricants, or POL cargo in shipping terms, and is currently handled at the port’s berth eight. Phosphoric acid is the main chemical cargo and is handled at berth 11.

But according to the port commodity data presented in MPT’s liquid-cargo feasibility report, there has been no increase in the liquid cargo handled at MPT since 2011. Total liquid cargo at MPT declined from 1.4 million tonnes in 2011-12 to 1 million tonnes in 2012-13, and has remained close to that figure since. The quantity of POL cargo handled, declined from 0.8 million tonnes in 2012-13 to 0.6 million tonnes in 2016-17.

Moreover, the Sagarmala master plan’s estimates run contrary not just to recent trends of liquid throughput at MPT, but also estimates computed by port-commissioned studies. In 2016, the MPT commissioned Aarvee Associates, a Hyderabad-based firm, for the expansion project’s feasibility report. Released in February 2017, the report found that the growth in petroleum products would not be as the master plan projected. Analysing the future demand for petroleum in Goa, the report suggested that the growth would be “more or less in a straight line,” rising 1.5 percent each year to just 0.64 million tonnes in 2025 and 0.75 million tonnes in 2035. This is less than half of the master plan’s estimates.

A similar estimate was also offered by Tata Consultancy Engineers Limited, a subsidiary of the Tata Group, in a concept report it submitted to the MPT in October 2015. The report said that just 0.6 million tonnes of petroleum cargo would be handled in 2035— the same as present levels.

The master plan’s estimates also contradict its own annexures. One of the annexures is a benchmarking study carried out by the Boston Consulting Group (BCG), a multinational consultancy. The BCG study said that most of the petroleum cargo that arrives in Goa is in the form of petrol and diesel for local use, which is “not expected to grow significantly as fuel consumption will remain steady.” “Neither the berth occupancy, nor the parcel size is expected to grow significantly in the future,” the BCG report said.

The feasibility report pointed out that the berth eight, before it was handed over to Vedanta, was operating below capacity at 30 percent against the accepted optimum level of 70 percent. The master plan itself calculated that at optimum levels, berth eight can handle 2.2 million tonnes of cargo—enough for the estimates offered by the feasibility report, the Tata report, the BCG study and its own draft figures. The Tata report had also pointed out that berth 11, where chemicals are presently handled, can handle future quantities of both POL and chemicals, and recommended its conversion to a liquid berth instead of building a new berth.

The master plan, however, offers no explanation for its projections. The section “Major Commodities and their Projections” explains future quantities of coal, iron ore, steel, even woodchips and gypsum, based on the economic profile of the hinterland that the port serves, but there is no word about liquid cargo.

In fact, the estimates in the master plan appear to have been increased by the shipping ministry before it was finalised. The draft master plans for major ports were prepared by a consortium of AECOM, a Los Angeles-based engineering consultancy, and McKinsey and Company, a global consulting firm. Based on the consortium’s drafts, the shipping ministry used inputs from “a variety of internal and external experts” to finalise “the most appropriate strategy to give effect to the Cabinet’s decision of 25 March 2015.” According to the plan document, a draft was first submitted in February 2016, after which the document was revised twice to incorporate “comments” from the shipping ministry— first in May and then in August, when the plan was finalised.

Though the draft plans are not available on the Sagarmala website, the port-commissioned feasibility report said the February 2016 draft had estimated that 0.8 million tonnes of petroleum cargo would be handled at MPT in 2025 and 1.9 million tonnes in 2035. In the final version, approved by the shipping ministry, these estimates were inflated to 1.8 million tonnes for 2025 and 2.7 million tonnes for 2035, without any explanation.

The increase in estimates is significant because the port’s existing facilities appear sufficient to cater to the draft estimates—in fact, all the estimates offered except those in the final master plan. As a result, both the Sagarmala scheme and MPT—which have to pitch in equal share of the cost as per Sagarmala funding guidelines—will invest scarce public funds into building new berths when an existing berth is already sufficient. Indeed, according to the feasibility report, in early 2017 MPT officials said that they would not go for the entire Rs 680-crore project as recommended in the master plan, but just the Rs 136-crore liquid-cargo berth “due to financial considerations.” In August 2018, the port’s then chairperson I Jeyakumar told the news website Goa Spotlight, “Since we are in a financially difficult position, we will discuss in the board [of trustees] whether to retain the same POL berth … Because the new POL jetty we’ll have to spend Rs 136 crore, instead we can retain the present POL jetty.”

Port documents accessed through Right to Information (RTI) show that in November 2016 the port had tried handing over the work of building and operating the new berths through the public-private partnership route. However, no firms were interested. In 2017, it floated another tender, this time just for the liquid berth, but again failed to receive bids—a sign that the revenue from the berth does not cover the costs of building it.

The project’s questionable provenance is further bolstered by its Environment Impact Assessment (EIA) report, prepared by Ultra-tech, a Pune-based consultant. The EIA report has been severely criticised for failing to adhere to the terms of reference (ToR) — the structure, purpose and parameters of evaluation. Dredging work for the project can have disastrous consequences on land stability and marine life, including massive erosion of the Kharewado beach. None of these concerns have been addressed in the EIA report, despite clear directions in the ToR.

In another curious twist, the EIA report has not only repeated the master plan’s fait accompli argument for the new berth, but also given it an additional spin—as a project for fishermen.

An environment ministry letter shows that under “benefits of the project,” the port has not mentioned the liquid cargo at all, instead said that the project will “give boost [sic] to the economic welfare of local fishermen.”

This stems from a proposal for a fishing jetty for mechanised trawlers that has been planned on the other side of the new liquid berths. In the EIA report, the port has admitted that the new jetty was necessary because at its current site near the port, the trawlers would be an obstruction to petroleum-carrying ships. But Tania Devaiah, a Goa-based researcher with the Centre for Policy Research-Namati Environment Justice Programme, questioned the rationale behind the plan. “How is this beneficial to the traditional fisherfolk who use the beach for fish landing, canoe parking and other allied fisheries activities?” Devaiah asked. “This proposal tries to drive a wedge between traditional fishermen and trawlers owners by dangling the carrot of a modern jetty.”

At least 150 traditional fishermen are in danger of losing their livelihoods as the berths and fishing jetty would block their access to the sea. On the morning of 5 October, I met Custodio D’Souza, president of the Old Cross Fishing and Canoe Owners Cooperative Society, which represents 110 canoes owners operating in Vasco Bay.

At the society’s office, a small concrete room at the Kharewado beach, D’Souza told me that in December 2016, three months after Vedanta signed the concession agreement, the port asked Old Cross to sign a Memorandum of Understanding that instructed it, and another canoe society at Kharewado, to “cooperate” with the construction of the new berths and try to settle disputes directly with the port. D’Souza never signed the MoU. “We were never consulted in drafting the MoU. This is our land. We have been fishing since before MPT came. They should come to us and take us into confidence,” he told me. “Now the new berths will finish the traditional fishermen of Kharewado,” said D’Souza.

In September this year, Jeyakumar, who has since completed his term of office, told reporters that the board had decided to “wait for the public hearing on 5 October.” The public hearing is a stipulation under the provisions of the Environment Impact Assessment (EIA) Notification, 2006, and was conducted to elicit feedback on the environmental and feasibility report of the project.

I attended the public hearing, and in a presentation at the hearing MPT officials said that the new liquid berth would have a capacity of just 1.55 million tonnes per annum— lower than the existing capacity. When one attendee pointed out that this meant the existing berth was sufficient, port representative DD Ambe said, “It is there but it is coming in the [way of] berth 8, 9 development. Concession agreement is already signed in 2016.”

“It is clear that this project is linked with the Concession agreement with Vedanta so MPT has contractual obligation to move POL from berth 8,” Abhijeet Prabhudesai, a member of the Goa-based environment action group Federation of Rainbow Warriors said at the hearing.

The project and the questionable circumstances under which it is being pushed come at a time when the port has faced increasing scrutiny over its modernisation plans. MPT seeks to replace its historic mainstay cargo iron-ore, which faces an uncertain future following Supreme Court rulings, with coking coal, the demand for which is rising from the steel industry in Karnataka.

After the NDA government took office in 2014, and before the Sagarmala scheme was announced, a number of projects were proposed to double the port’s coal-handling capacity. These were subsequently backed by the master plan. But all of these proposals have collapsed due to irregularities in environmental clearances and in light of growing public opposition in Goa against air pollution caused by coal handling.

The first such proposal was a 2015 project to deepen the port’s approach channel to enable the world’s largest coal-bearing vessels to dock at MPT. The project was stopped in 2016 by the National Green Tribunal, after it found irregularities—including blatant violations of the law by the shipping minister Nitin Gadkari—in the environment clearance granted to the project. Incidentally, it was the Old Cross canoe Society which had approached the tribunal, protesting against the project. The next year, the Goa government stalled the environmental clearance to a project by Sajjan Jindal’s JSW Steel to double the capacity of its captive coal terminal at MPT, taking note of growing public sentiment against coal. In July 2018, the state pollution control board reduced the permissible handling of coal at the berth and terminal operated by the Adani group at MPT. Vedanta’s proposed berth too is yet to take off, not just due to the opposition to coal, but also the uncertainties over resumption of iron-ore mining in Goa.

The proposal to build new cargo berths now faces similar scrutiny. The anti-coal movement has now trained its guns on the project given that it is being proposed mainly in response to Vedanta’s need for space for its coal terminal. “This is all one project to increase coal handling,” Prabhudesai said. “But there is no scope for the [environment ministry] to examine the whole project as each time they will see only one part and will be told that all others are through, ” he added.

On 26 October this year, Savio Correia, a Vasco-based lawyer, received information under RTI which stated that the environment ministry had delisted the Vedanta project’s environment clearance application in September 2017. On 2 November, when I contacted the MPT deputy chairperson, GP Rai, he said he was unaware about the delisting. Though the RTI response showed that the delisting was the result of an error—MPT’s letter withdrawing its request for exemption from public hearing was considered as withdrawal of the entire proposal—senior port officials were oblivious to the delisting 14 months later. MPT had not followed up with the environment ministry to process environment clearance for the project.

Rai told me over the phone, “There are many uncertainties around iron-ore mining and with every development the project economics completely change. So we will wait and see whether mining will start.” When questioned about the possibility of a parallel or supplementary agreement with Vedanta wherein MPT would retain berth eight and hence shelve the expansion, Rai said, “There is no decision on retaining berth eight. But we wondered if we can rethink investing money in the new berth. We will have to discuss with Vedanta and both parties would have to reach a mutual understanding on this.”

Nihar Gokhale is an environmental journalist with an interest in the politics and impacts of infrastructure projects. He is the associate editor at Land Conflict Watch, an independent network of researchers studying land conflicts, climate change and natural-resource governance in India