Vizhinjam port to be fully operational by May next year: Karan Adani

The heavily delayed international container terminal at Vizhinjam near Thiruvananthapuram in Kerala will be fully operational by May 2024, said Karan Adani, chief executive officer of Adani Ports and Special Economic Zone Ltd (APSEZ), which is building the new port.

“We assume that the first ship will dock in October this year, when we also expect the delivery of the first equipment. We expect phase 1 of the port (400 meter wharf) to be operational by March 2024 and the rest by May 2024. Therefore, we expect Vizhinjam Port to be fully operational by May 2024,” Karan Adani said at an analysts’ conference on Tuesday after the company announced fourth-quarter and full-year financial results.

The new port aims to reduce India’s dependence on nearby Colombo for sending and receiving containerized cargo.

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

Adani Vizhinjam Port Pvt Ltd (AVPPL), the APSEZ entity developing the port, holds force majeure events responsible such as Cyclone Ockhi, high waves, an order from the National Green Tribunal, the pandemic, Cyclone Tauktae and other reasons attributable to Kerala authorities for the delay in achieving the project’s planned commercial operating date (COD) as specified in the concession agreement.

The force majeure clause relieves companies from performing their contractual obligations for reasons beyond their control.

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

The Vizhinjam project is eligible for a Rs 1,635 crore Profitability Grant/Equity Support Grant which will be shared by the Center (Rs 818 crore) and the Government of Kerala (Rs 817 crore) to increase its viability and make it the first and only port to make project such a grant is offered. Of this, 1,227 crore rupees will be provided during the construction phase and the balance during the 40-year operational period, which can be extended for a further 20 years.

VGF is a one-time central government grant to support infrastructure public-private partnership (PPP) projects that are economically justified but not financially viable.

The VGF was the basis on which the bid was awarded to Adani Ports and Special Economic Zone Ltd (APSEZ), which offered the lowest grant of 1,635 crore rupees at an auction in 2015.

The “in principle” approval for granting VGF for the Vizhinjam port project was granted by the Center in February 2015.

Adani Vizhinjam Port has received the “Final Approval” from Economic Department of Union Treasury Department for Rs.1,227 crore Rs.

Adani Vizhinjam Port would like to sign a tripartite agreement under VGF guidelines in the coming months, which is a prerequisite for VGF disbursement, APSEZ said on Tuesday after the results were announced.

Adani Vizhinjam Port has submitted an application for completion of 30 per cent of the funded works valued at Rs 346.75 million which was approved by an independent engineer and the Kerala Government Agency in February this year. The port developer received an installment payment of 100 crores rupees in March and the balance is expected to be received in the coming months, it said.

APSEZ added that the new port “offers significant business opportunities for cargo handling due to the strategic location of the project.”

Vizhinjam is being developed as a container terminal with an investment of Rs 5,552 crore to compete with Colombo as its basic infrastructure such as water depth and proximity to the main shipping route is better than Colombo – the largest terminal in the region.

The Government of Kerala will collect a premium/revenue share from the private operator from the 16th year of operation equal to 1 per cent of the gross revenue of the facility. The premium charged by the private operator increases by 1 percent each year until it reaches 40 percent.

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

According to port and shipping industry sources, Vizhinjam Port is best placed to reduce India’s reliance on Colombo – a regional hub – for sending and receiving cargo containers, adding time and expense to exporters and importers.

Vizhinjam has a natural water depth of 20 meters, which allows for the berthing of large mother ships, a key element
Prerequisite for accommodating a transhipment point. In addition, the port is only 12 nautical miles from the international shipping route, providing direct access to international trade.

Annually, around 3 million 20-foot equivalent units (TEU) cargo containers destined for India are transhipped at neighboring country ports, particularly 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 around 2.5 million TEU.

“Given the additional port handling charges incurred at transshipment hubs, transhipment of cargo creates logistical cost inefficiencies for Indian industry. The additional port handling costs amount to US$80-100 per TEU, which could be saved if the container were imported/exported as direct gateway cargo rather than being transhipped,” states Maritime India Vision 2030, a 10-year-old Design for maritime sector, stressed.

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