The move is being seen as a serious entry by Reliance into the general port sector. So far, the company had only constructed such facilities for captive use. RIL has been shortlisted along with two other companies by the Gujarat government for a similar project in Hazira. Unlike most other port construction and management companies, which are bidding for projects thrown open for the private sector, RIL is looking at combining port facilities with LNG-based power plants as all the maritime states - Maharashtra, Gujarat, Tamil Nadu, Kerala and Andhra Pradesh - are at the tail end of transport logistics from the north. Besides the uncertain supply, transportation adds to power producers' costs. LNGis, therefore, emerging as a strong alternative. Globally, LNG prices are on the decline. Huge supplies from countries like Yemen, Qatar and Oman combined with a global decline in demand owing to the economic slowdown, particularly in south-east Asian countries, have forced producers to drop prices.

In India, the constraint to large LNG imports, especially to the coal- starved south, has been the lack of facilities for offloading the gas. All the existing major ports are out of the reckoning because of their inability to give right of way for LNG carriers, constraints of draft and safety reasons. Transit into berth within 24 hours, offloading on sites isolated from general berths and a quick turnaround are crucial factors in the LNG transportation chain. Thus, the existing infrastructure is grossly inadequate to receive the centre's demand estimate of 30 million tonnes per annum, estimated to cost Rs 12,000 crore ($3 billion). It is this niche that RIL has identified as a potential business area. But inthis combination of power plants and ports, there is a more complex financial logic. Greenfield private-sector ports - even if they focus on the lucrative container-handling business - will find it difficult to compete with the existing major ports, which have lower costs and do not have to operate on commercial principles. If there is an assured offtake for 4,000mw of power by the state, this would, in effect, subsidise port operation to a large extent. The guaranteed traffic would also make lenders more amenable to funding the project.

The lenders' perspective is very important for these projects. Estimated to cost anywhere upwards of Rs 16,000 crore to be able to reap economies of scale, raising funds, even for RIL, will not be easy. While the port itself will cost Rs 400 crore, the LNG terminal will cost Rs 1,200 crore, the 4,000mw power plant another 14,000 crore and rail and road linkages Rs 200 crore. But what will be crucial for these projects is that the state government will have to see them as acombined power and port project.

Sources say RIL has made presentations to the Tamil Nadu government and is considering making one to Andhra Pradesh. These states are considered more attractive than Gujarat and Maharashtra, which already have major ports and where many private players have also emerged.