Kerala government, Adani sign agreement to complete Vizhinjam project by 2028

New supplementary agreement has stipulated that the remaining phases of the works should be completed in 2028 instead of 2045 fixed in the first agreement

Ahead of the scheduled commissioning of the Vizhinjam international seaport in December, the State government on Thursday entered into a supplementary concession agreement with the Vizhinjam Private Port Limited (AVPPL), extending the project period to five more years. The supplementary concession agreement was necessitated following the State government’s decision to withdraw the arbitration proceedings initiated against the Adani Group.

The State initiated the arbitration proceedings against the port concessionaire when the company missed the deadline of the project, which was to be commissioned in 2019 as per the initial agreement. The new supplementary agreement has stipulated that the remaining phases of the works should be completed in 2028 instead of 2045 fixed in the first contractual agreement. For completing the remaining two and three phases, an investment of ₹10,000 crore has to be made by the AVPPL. 

Announcing the signing of the supplementary agreement, Chief Minister Pinarayi Vijayan said in his social media post that the port’s container handling capacity would be enhanced to 30 lakh TEUs (twenty-foot equivalent units) from the 10 lakh TEUs in phase one. “This milestone underlines our commitment to comprehensive development and global connectivity,” he said.

As part of the new agreement, the State government will get its revenue share from 2034 itself, 15th year after the port began operations if it had been commissioned in 2019. Though the commissioning of the port is extended to 2024, the State insisted that receiving the State share of the port’s revenue cannot be extended to 2039 in line with the delay in commissioning the port.

Penalty

The State initiated arbitrary proceedings against the company, claiming ₹219 crore as a penalty for not meeting the deadline. As per the first agreement, the firm has to pay a sum of ₹12 lakh per day to the State for each day of delay, estimating a total of ₹219 crore as penalty. The State has forsaken the claim for penalty now as part of fixing new terms for the port construction. The State will pay its viability gap funding (VGF) share to the company in two installments – ₹189.90 crore will be paid now and another installment of ₹175.20 crore by 2028 when the firm completes the remaining phases of the work.

The feasibility study report of the Vizhinjam port has pegged the total revenue to be earned from the port at ₹54,750 crore and the State will get a share of ₹6,300 crore during the 40-year operation period. However, the present estimation pegs the total revenue at ₹2,15,000 crore, and the State share would be at ₹35,000 crore if phases two and three are completed in 2028. Considering the GST share, the State’s share of total revenue is estimated at ₹48,000 crore.

Centre yet to provide

Of the ₹8,867 crore project (phase I), ₹5,595 crore has to be borne by the State government. The State share includes its VGF share, construction of the access road, rail connectivity, land acquisition, and compensation for livelihood loss. So far, the State has spent ₹2,159.39 crore of the ₹5,595 crore, while the Adani’s contributed ₹2,454 crore, said Port Minister V.N. Vasavan. The Centre has yet to provide its VGF share of ₹817.80 crore to the concessionaire.

Billed as India’s first automated port with state-of-the-art infrastructure and facilities, the Vizhinjam port built on a public-private partnership, is capable of handling large mother ships, with its advanced container handling equipment and world-class automation and IT systems. Close to the international shipping channel, the Vizhinjam seaport is expected to end India’s dependency on Colombo, Dubai, and Singapore ports for transshipment.

Published - November 28, 2024 08:33 pm IST