Looking to hedge Rs 1 lakh crore loan: Nitin Gadkari

Centre is looking at hedging risks as it is planning to raise Rs 1 lakh crore in dollars for the port sector, Union minister for Shipping and Ports Nitin Gadkari has said.

"I am unable to solve one problem, how to do hedging for this money?" Gadkari said while speaking at an industry meet here over the weekend.

Reiterating that there are benefits by way of interest cost reductions if money is raised in foreign currency, Gadkari said "hedging is necessary as if anything goes wrong in the future, he will be blamed".

He added that there are multiple solutions on the table, without specifying them.

The minister had last month announced the plan to raise money in American currency, against the dollar receivables of the country's largest container port JNPT and the state-run Shipping Corporation of India, which run up to Rs 5,000 crore per year.

At this event, Gadkari said money of up to Rs 1 lakh crore can be raised for 15 years against these receivables.

The money raised will be used for developmental works in the ports and shipping sector, he said, elaborating on the savings in interest.

While raising the finance for a Rs 4,000 crore road widening project, JNPT was mulling to raise money domestically for which it would have had to pay an interest of up to 12%.

The minister said he suggested dollarisation as an alternative and called up ICICI Bank's managing director and chief executive Chanda Kochhar, and convinced her to charge a lower rate of Libor plus 0.5%. This comes to 3-3.5%, which is a lot lower than the 12% rupee funding alternative.

Reserve Bank has been repeatedly asking Indian companies to hedge their foreign currency loans.

"Our focus is on undue increases in volatility, but we are not going to maintain any particular level for the rupee and so they have to recognise that they are taking on a big risk, especially if monetary conditions change around the world," Governor Raghuram Rajan had said earlier.