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Vizhinjam Port to be fully commissioned by May next year: Karan Adani

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Vizhinjam Port to be fully commissioned by May next year: Karan Adani

The much-delayed international container transhipment port at Vizhinjam near Thiruvananthapuram in Kerala will be fully commissioned by May 2024, Karan Adani, Chief Executive Officer, Adani Ports and Special Economic Zone Ltd (APSEZ), which is building the new port, has said. 

“We expect the first vessel to berth in October this year, that’s when we expect the first equipment to come. We expect the Phase 1 of the port (400 metre quay) to be commissioned by March 2024 and the balance by May 2024. So, we expect the full commissioning of Vizhinjam Port by May 2024,” Karan Adani said at an analysts call on Tuesday after the company announced the fourth quarter and annual financial results. 

The new port is designed to cut India’s dependence on nearby Colombo to send and receive container cargo.

According to the concession agreement signed on August 17, 2015, Vizhinjam port was slated to start operations on December 3, 2019.

Adani Vizhinjam Port Pvt Ltd (AVPPL), the APSEZ unit developing the port, has blamed force majeure events arising from acts of God such as the Cyclone Ockhi, high waves, a National Green Tribunal order, the pandemic, Cyclone Tauktae and reasons attributable to Kerala government authorities for the delay in achieving the scheduled commercial operation date (COD) set by the concession agreement for the project.

Force majeure clause absolves firms from meeting their contractual commitments for reasons beyond their control.

The delay and the reasons behind it are currently being heard by an arbitration panel. 

The Vizhinjam project is entitled to receive a viability grant funding/equity support grant of Rs1,635 crore to be shared by the Centre (Rs818 crore) and the Kerala government (Rs817 crore) to boost its viability, making it the first and only port project to be offered such a grant. Of this, Rs1,227 crore will be given during the construction phase and the balance during the operation period spanning 40 years extendable by another 20 years.

VGF is a one-time grant given by the Central government for supporting public-private-partnership (PPP) projects in infrastructure that are economically justified but fall short of financial viability.

The VGF was the basis on which the bid was awarded to Adani Ports and Special Economic Zone Ltd (APSEZ), which quoted the least grant of Rs1,635 crore in an auction in 2015.

The “in-principle” approval for granting VGF to the Vizhinjam port project was accorded by the Centre in February 2015.

Adani Vizhinjam Port has secured “final approval” from the Union Finance Ministry’s Department of Economic Affairs in October 2022 for the construction phase VGF of Rs1,227 crore.

Adani Vizhinjam Port is looking to sign a tripartite agreement per the VGF guidelines in the coming months which is a prerequisite for disbursement of VGF, APSEZ said on Tuesday after announcing the results.

Adani Vizhinjam Port has filed a claim for completion of 30 percent of funded works worth Rs346.75 crores which has been approved by an Independent Engineer and the Kerala government authority in February this year. The port developer has received part payment of Rs100 crores in March and the balance is expected to be received in the next few months, it added. 

APSEZ added that the new port holds “significant transhipment cargo business opportunity due to the strategic location of the project”.

Vizhinjam is being developed as a container transhipment port with an investment of Rs5,552 crore to compete with Colombo because its basic infrastructure such as water depth and proximity to the main shipping lane is better than Colombo — the biggest transhipment facility in the region.

The Kerala government will collect a premium/revenue share from the private operator from the 16th year of operations that will be equivalent to 1 percent of the gross revenue from the facility. The premium collected from the private operator will rise by 1 percent every year till it reaches 40 percent.

In turn, the Kerala government has agreed to share 20 percent of the annual premium it collects from the private operator with the Centre till the VGF is repaid.

The Vizhinjam port, according to port and shipping industry sources, is best suited to cut India’s dependence on Colombo — a regional transhipment hub — to send and receive cargo containers entailing extra time and costs for exporters and importers.

Vizhinjam has 20 meters of natural water depth that allows big mother ships to dock, a key requirement for hosting a transhipment hub. Further, the port is only 12 nautical miles from the international shipping route,
giving direct access to international trade. 

Annually, around 3 million twenty-foot equivalent units (TEUs) of India- bound cargo containers are transhipped at neighbouring country ports especially Colombo, Singapore, and other regional ports, according to government estimates. Colombo, Singapore, and Port Klang handle more than 85 percent of this with Colombo alone handling about 2.5 million TEUs. 

“Given the extra port handling charges incurred at the transhipment hubs, transhipment of cargo results in logistic cost inefficiencies for Indian industry. The additional port handling cost is to the tune of $80- 100 per TEU, which could be saved if the container was imported/exported as direct gateway cargo instead of being transhipped,” the Maritime India Vision 2030, a ten-year blueprint for the maritime sector, pointed out.

Source: ET Infra

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