Vizhinjam International Seaport

Controversies 

Vizhinjam International Deepwater Multipurpose Seaport വിഴിഞ്ഞം അന്താരാഷ്ട്ര തുറമുഖം
Location
Country	India
Location	Vizhinjam, Thiruvananthapuram, Kerala
Coordinates	08°22′45″N 76°59′29″E / 8.37917°N 76.99139°E / 8.37917; 76.99139 Vizhinjam Vizhinjam (India)
Details
Operated by	Vizhinjam International Seaport Ltd
Owned by	Government of Kerala
Draft depth	22m
Website http://www.vizhinjamport.in/

Vizhinjam International Seaport is a port under construction by the Arabian Sea at Trivandrum in India.^[1] The total project expenditure is pegged at ₹ 6595 crores over three phases and is proposed to follow the landlord port model with a view to catering to passenger, container and other clean cargo.

Vizhinjam International Seaport Limited (VISL) is a special purpose government company (fully owned by Government of Kerala) that would act as an implementing agency for the development of a greenfield port - Vizhinjam International Deepwater Multi purpose Seaport- at Vizhinjam in Thiruvananthapuram, capital city of Kerala.

Project History

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's economic rationale. The first round was granted to a Chinese company that failed to secure the security clearance from the Center, the second round which was first awarded to Lanco Group and then challenged in the Kerala High Court by Zoom Developers led to the eventual withdrawal by Lanco Group. The Kerala cabinet on June 10, 2015, decided to award the multi-thousand crore Vizhinjam international port and deep-water container transshipment terminal to Adani Ports and SEZ, the sole bidder.

The International Finance Corporation (IFC), a member of the World Bank Group is currently the transaction advisor to VISL. The IFC was appointed in November 2009 as the lead advisor to the Vizhinjam Port. The IFC undertook in 2009 - 2010 a series of studies and reports that recommended the State to undertake the project under the Landlord Model. The Landlord model would see the State make the final investment of over 1 Billion USD to build the port. As opposed to the PPP model where the Private Partner would bear the cost of the port. The IFC has also undertaken the task of conducting the Environmental Impact Assessment Study of the Container Port.

After the IFC recommended landlord model was accepted by the State Government, a bidding round concluded with a consortium led by Welspun being the sole eligible company for the port operator role. The Welspun Group however requested a grant of about 480 Crores (Approximately 90 Million USD as a grant in terms of Net Present Value over 16 years). Negotiations between the State Government and the Welspun Group resulted in Welspun agreeing to reduce the grant to 400 Crores (Reduction of about 15 Million USD). This offer was rejected by the Kerala State Government since the terms of the Public Private Partnership saw no economic rationale for the State Government.

IFC has commissioned a team of consultants for the implementation of the project.

• Technical design and environmental and social study by Royal Haskoning.

• Investment quality market study by Drewry Shipping Consultants.

• International legal team of Allen & Overy (Singapore) and Trilegal (India).

• Asian Consulting Engineers who undertook the Environmental Impact Assessment after being contracted to do so by the IFC

Expert Apprisal Committee of the Ministry of Environment had recommended clearance for the project on 3 December 2013.Tenders for construction of break water and fish landing centre and Port operator were floated on very next day.

Project Details

The port development is proposed to follow the landlord port model where the dredging, reclamation as well as basic external infrastructure work like construction of break-water and quay wall will be taken up by VISL. Further, it is also expected to monitor Land Acquisition, road/rail infrastructure, water and power supply required for the construction and operations of the port on behalf of Government of Kerala (GoK).

The port terminal will be developed under Public Private Partnership(PPP) model wherein the construction and operation of the port terminal would be on Build, Operate and Transfer (BOT) basis. The port development along with the external infrastructure work is envisaged to be carried out in phases with the cumulative cost estimated to be around Rs. 6595 crore. The port is envisaged to provide in total 2000m of quay length in three phases and is designed to cater primarily for containers transshipment, besides providing for other type of cargo such as Multi-Purpose, Break Bulk.

The construction of basic civil infrastructure viz. dredging, land reclamation, construction of breakwaters and quay wall, as also land acquisition, road/rail connectivity and other external infrastructure required in phase 1 and the cost for the same is estimated to be Rs. 3040 crore. The said project cost is proposed to be funded through Rs. 1130 cr as equity from GoK and balance amount is proposed to be raised as debt through loans from banks/ institutions and through bonds.

Importance

During the last decade, there has been a steady growth of container traffic at the Indian ports. Currently, the majority of these ports rely on direct services or use far off ports for their transshipment needs. This necessitates the establishment of an International Deepwater Seaport and Container Transshipment Terminal in the Southern Indian Peninsula.

The port is proposed at Vizhinjam, 16 km away from Thiruvananthapuram, capital of State of Kerala. Kerala being the southern most state in India beset by Arabian Sea. The proposed Vizhinjam port is just 10 nautical miles from the International Shipping Lane. The Vizhinjam port is endowed with a natural seawater depth of up to 24 m as close as one nautical mile from the seacoast. Due to this natural depth, Vizhinjam can attract the largest container vessels currently in operation and also the future mega container carriers. Site needs minimal capital dredging thus the project cost and maintenance cost will be minimum.

Controversies

Why Vizhinjam?

There were unending debates on why we require another transhipment port about 220km away from Kochi International Container Transhipment Terminal (ICTT) at Vallarpadam.

"It is pointed out that Vallarpadam is running at 35 per cent capacity without the expected revenue returns." "The maintenance dredging expenditure in Kochi has surged by about ₹72 crore per year following the commissioning of Vallarpadam project. But even if the NPV (net present value) of the dredging expenditure over 40 years was taken and added to the cost of Vallarpadam project, the total cost would be only ₹4,398 crore, which is less than the Vizhinjam project cost."^[2]

"Promoters of Vizhinjam seem to be over-confident of its potential. Of course, the port has its plus points. It has the natural advantage of deep draft capable of handling large vessels. It means no recurring cost of dredging as in the case of Kochi port. The port is closer to the international shipping route. Unlike Vallarpadam, which being part of the Major Port of Cochin is subject to tariff regulations, Vizhinjam will be a private port with freedom to set own charges."^[3]

CAG Report

The observations made by the Comptroller and Auditor General (CAG) on the concession agreement entered by Kerala government with Adani Ports had initiated some controversies. The CAG report says “In the current agreement, the concession period was fixed as 40 years. By allowing 10 years extra concession period, the Concessionaire would be collecting additional revenue of 29,217 crore”^[4]. 

According to Mr. Oommen Chandy, the then Chief Minister of Kerala, “The comments of AG has created some doubts in the minds of the people, which is not realistic and true to facts.”^[5] Supporters of the project see external interference in the CAG report^[6] and that some international lobbies were working against^[7] the project which is being built by the most successful port operator in India.^[8]

Concession period

Dr. Jose Paul, former chairman of Mormugao Port Trust, opines that the charges made by CAG are baseless. “When an entirely new port is to be built on new locations, a longer period is granted to enable the investor to develop basic infrastructure such as breakwater, approach channels, navigational aids, berths, back up area, and equipment. The concession period given by Andhra Pradesh in 2008 for Krishnapatnam port in Nellore is for 50 years; 30 years with provision for extensions of two 10-year periods up to 50 years. Maharashtra has given a 50-year concession to develop Jaigarh port in Ratnagiri with an option to have another 50 years on mutual consent.“^[9] As per the Former Planning Commission Principal Adviser (Infrastructure), Gajendra Haldea, “The concession period had been fixed as 40 years in accordance with the Model Concession Agreement published by the Central government”.^[10]

It is also pointed out that in the previous agreements / draft agreements for the project, the 30 year term excludes the construction period, whereas the 40 year concession period in the current agreement includes the time to get clearance from various departments and the actual port construction period. CAG report is also accused of being blind on the nearby Vallarpadam project, which took 6 years to complete the first phase, even though it is a brown field project where some basic infrastructure already exists, whereas the report bases its findings on the Colachel project which is still on paper only. The inclusion of construction period in the agreed time frame gives a motivation to the concessionaire to complete the project quickly. “Adani Vizhinjam Ports has already announced that the work on the first phase will be completed within 1,000 days, although, as per the agreement, it has four years to do the same.”^[11]

Investment & Revenue Share

There were allegations that the Vizhinjam Ports project is not beneficial to the state or its people and that after spending 67% of the project cost, Kerala government is not going to get proportionate benefits compared to the concessionaire who is spending the remaining 33%.

Mr. Kadannapalli Ramachandran, Minister for Ports, in the Pinarai Vijayan Ministry, had replied^[12] to the queries by MLAs in the Legislative Assembly that the Kerala government’s share of investment will be 56% when the 11% VGF share of Central Government is also taken into account. When the investment by the concessionaire in the port estate also is considered, the total cost of the project becomes ₹ 110 billion (11,000 crore) and the investment share of concessionaire goes over 50 percent. The concessionaire also has to invest in the second and third phase of development, when that also is considered the investment share of the concessionaire will be much more. Minister had clarified that the concessionaire will have to pay the Government a share of their total revenue from the fifteenth year and that the company has to find money for the expenses from the remaining revenue. He said that the observations in the CAG report were not the profit but were the total revenue figures before expenses. The Minister also stated that the project deal was only good for the state.^[13]

User fee in Fishing Harbour

Based on the comments in the CAG report, some people were arguing that the concessionaire was given the right to collect fee from users of the fishing harbour.

But in reality, clause 12.6.10 of the Concession Agreement^[14] states,  ”The obligations of the Concessionaire, for and in respect of the fishing harbour forming part of Funded Works, shall be restricted to the construction thereof. For the avoidance of doubt, the Parties expressly agree that the operation and maintenance of the fishing harbour shall, at all times, be undertaken by the Authority (Government of Kerala).” 

Advantages

• Vizhinjam is an all-weather port located on the Southern tip of the sub-continent, it is just 10-12 nautical miles from the busy Persian Gulf - Malacca shipping lanes which carry almost a one third of the world shipping traffic.
• Central to the eastern and western coast lines of India - can cater to the needs of both west and east coast.
• The proposed transshipment terminal will be an ideal location for attracting mainline vessels ranging from Post Panamax to Malacca-max in a phased manner.
• The proposed site is endowed with natural depth of more than 20 m as close as one Nautical Mile from the sea coast.
• The proposed site has minimal Littoral drift and as such would hardly require any maintenance dredging during the years of operation. This will result in low O&M Costs.
• The proposed port is a Green-field project, away from urban/city limits, and thus can be master planned and shaped by the professional and experienced developer as per his own efficient designs and needs. The Port can turn out to be an efficient, modern and highly productive port with design, expertise and experience of the successful developer having international experience in such ports.
• Once the port is up, Indian exporters will not have to rely on foreign ports for trans-shipment of cargo. It is expected to save at least ₹ 1000 crores in expenditure annually.^[15]

Tourism Potential

• Kerala was listed as one of the 10 paradises in the world by National Geographic.^[16]
• Specialized cruise facilities charging competitive rates can promote significant tourism.
• Kovalam (2 km) , Poovar and Varkala (50 km) are major tourist destinations in India.
• Kollam, a popular gateway for backwaters & lagoon excursions is less than 2 hours drive.

Proposed Project Plan

An artist's impression of the proposed Vizhinjam Port

Proposed project plan for International Container Transshipment Terminal.

Note: The above estimates are subject to revision ,in consultation with successful project partners.

How to reach

Recent Developments

• Kerala awards Vizhinjam port project to Adani
• Vizhinjam Project: Request for Proposal (RFP) issued
• VISL signs MOUs with SBT, RVNL and KSEB
• Vizhinjam port work to start in March 2011
• Fugro Geotech to conduct Geo-Technical studies
• Major infrastructure firms vie for Vizhinjam project
• Banks okay INR 2,500 crore ($550 Million) funding for Phase I
• India: Plan for Vizhinjam Port Unveiled
• RFQ issued for Vizhinjam port

References

1. Vizhinjam Port in Triandrum

See also

• Trivandrum Investment and Business Zone - TRIBIZ
• Vizhinjam Port Official Web Site.
• Why Vizhinjam Port won’t Go the Vallarpadam Way
• Vizhinjam Seaport- Facts amidst Falsehoods!