Kerala, Adani Ports sign agreement for development of Vizhinjam Seaport

Kerala Chief Minister Pinarayi Vijayan on Thursday announced the signing of a supplementary concession agreement between the state government and Adani Vizhinjam Port Pvt Ltd, ensuring the future development of the international seaport, the first phase of which is now slated for commissioning next month.

 

As per the agreement signed on Thursday, the project, envisioned as a transformative step in Kerala's maritime infrastructure, will see its second and third phases nearing completion by 2028. 

These phases will involve an additional investment of Rs 10,000 crore, expanding the port's capacity to 30 lakh Twenty-foot Equivalent Units (TEU). 

The Left government signed the agreement with Adani Ports nearly a week after billionaire Gautam Adani was charged by US prosecutors for allegedly being part of a scheme to pay $265 million (about Rs 2,200 crore) in bribes to Indian officials in exchange for favourable terms for solar power contracts. 

 

The Adani Group stated that its chairman and his aides have not been charged under the US Foreign Corrupt Practices Act but have faced three other charges, including securities and wire fraud, which are punishable by monetary fines. 

"We have entered a supplementary concession agreement with Adani Vizhinjam Port PVT LTD on @PortOfVizhinjam to extend the project period for 5 yrs & commission the port by December. As the 2nd & 3rd phases near completion by 2028, an investment of ?10,000 crore will be made, expanding the port's capacity to 30 lakh TEU," Vijayan said in a post on 'X'. 

"This milestone underlines our commitment to comprehensive development & global connectivity," he added. 

The project timeline has been extended by five years, taking into account things such as the Covid-19 pandemic and natural disasters such as the Ockhi cyclone, and floods. 

Due to delays, a penalty of Rs 219 crore has been imposed, with Rs 43.8 crore to be paid to the state. The remaining amount will be withheld until 2028. 

If the project is not fully completed by 2028, the five-year extension will be cancelled, and the withheld amount will be collected by the government. 

Addressing a press conference after the signing of the agreement, Kerala Port Minister V N Vasavan said through the intervention of the state government, the completion of the Vizhinjam International Port project would enable revenue gains for the government sooner than initially envisioned. 

Completing the construction as planned will set the minimum established capacity of the port at 3 million containers annually, said Vasavan. 

He noted that with the use of automated systems, the port's capacity would rise to 4.5 million containers per year. 

"By 2028, Vizhinjam International Port is expected to become the container terminal with the largest established capacity in South India. Under the previous agreement, the annual capacity was set at 1 million containers," the port minister said. 

He said that the current agreement ensures that the government will receive more revenue than under the original contract. 

According to the previous agreement, the government was supposed to start receiving a share of the port's revenue only from the 15th year after the port began operations, which would have been from 2034, he said. 

"Due to delays in project completion for various reasons, the Adani Group was only required to provide revenue shares starting from 2039. However, under the current agreement, the government will start receiving a share of the revenue from the port as early as 2034. This means that even with delays in construction, the government will receive more revenue than initially planned from Adani Port Company," the minister said. 

He noted that under the old agreement, the government's share was based on the revenue from the first phase of the port. "However, since the construction of all phases is expected to be completed by 2028, the profit share from the total revenue, once all four phases are operational, will be provided by the Adani Company to the government starting in 2034," Vasavan said.

The minister said that of the Rs 8,867 crore needed for the Vizhinjam port project, Rs 5,595 crore is to be borne by the state government. This allocation is designated for the state's Viability Gap Funding share, construction of the access road, land acquisition, rail connectivity, and compensation for livelihood loss. 

So far, the state government has spent Rs 2,159.39 crore of the Rs 5,595 crore it is responsible for, the minister added.

He said that Adani's contribution amounts to Rs 2,454 crore, while the central government's share stands at Rs 817.80 crore. The central share has yet to be received, he added.