Adani to build Vizhinjam port

The Kerala cabinet has decided to award the Vizhinjam international sea port and deep-water container transshipment terminal project to Adani Ports and SEZ, the sole bidder.

The Kerala government approved the recommendations of a high power panel headed by chief secretary Jiji Thomson to award the contract for the construction of the multi-crore Vizhinjam port project to Adani Ports, owned by Gujarat-based Gautam Adani.

However, an official announcement will be made only after the government gets the Election Commission's nod in the wake of the by-poll for the Aruvikkara assembly constituency, which fell vacant after the death of Speaker G Kartikeyan.

Vizhinjam International Seaport is an international deepwater multi-purpose shipping hub in its initial stages of development.

The total project expenditure is pegged at Rs6,595 crore over three phases and is proposed to be developed on the landlord model with a view to catering to passenger, container and other clean cargo.

The landlord model would see the state make the final investment of over $1 billion (Rs6,400 crore) to build the port, as opposed to the PPP model where the private partner would bear the cost of the port.

Adani Ports was the only firm to bid for the project. The company, however, submitted the tender after the government agreed to make changes in the cabotage laws.

There will not be any change in the tender terms and agreements, which provide for, among others, a revenue share of one per cent to the state government from the 15th year of operations, which may go up to 40 per cent going forward.

The land is being licensed to the Adanis for a period of 40 years even as the title of ownership rests with the government.

The Adanis will invest Rs2,454 crore on their own in the project. The company has demanded a grant of Rs1,635 crore. This is being made available as a viability grant fund to be shared equally by the state and central governments, a first for a port project.

In the first phas, the port will have 800-metre berth with a capacity to handle 1.8 million TEUs of cargo.

This will be raised to 1,200 metres of berthing space and 3 million TEU cargo capacity in the second phase and further to 2,000 metres of berthing phase, 5.3 million TEU capacity in the third phase.

The port will need an estimated investment of Rs5,350 crore, including Rs2,390 crore in the first phase, Rs1,100 crore in the second phase and Rs1,860 crore in the third phase.

The decision to award the project to Adani was taken despite opposition by the Left Democratic Front, which has been against entrusting the project to the Gujarat-based company.

Vizhinjam International Seaport Limited (VISL) is a special purpose government company (fully owned by the government of Kerala) that would act as an implementing agency for the development of a greenfield port.

The Vizhinjam Port was originally conceived about 25 years ago. The initial project model was suggested as the public private partnership (PPP)-private services model. Two rounds of bidding and tenders called under the PPP model ended up as a failure as a result of various reasons, including the inherent un-viability of the project.

The first round was granted to a Chinese company that failed to secure the security clearance from the centre. The second round, which was first awarded to Lanco Group was challenged in the Kerala High Court by Zoom Developers, that led to the eventual withdrawal by Lanco Group.

Finally, the Kerala cabinet today decided to award the project to Adani Ports and SEZ, the sole bidder.

The International Finance Corporation (IFC), a member of the World Bank Group is the transaction advisor to VISL.

IFC was appointed in November 2009 as the lead advisor to the Vizhinjam Port. The IFC has also undertaken the task of conducting the environmental impact assessment study of the container port.