Will Vizhinjam rival Colombo port or fizzle out like Vallarpadam and Hambantota?

Thiruvananthapuram: Vizhinjam seaport’s proximity to the international shipping route appears to have raised hopes that it will emerge as a top container transhipment hub in South Asia.

But a soon-to-be-released extensive study on Vizhinjam port states that the projections are not in sync with the ground reality. The report, prepared by prominent scientists, disaster management experts and social scientists under the banner of Janakeeya Padana Samithi (People’s Study Panel), comprehensively analyses the Vizhinjam issue besides providing long-term remedial measures.

It notes that three important ports in South Asia – Vallarpadam in Kochi, Hambantota and Oluvil in Sri Lanka – which were expected to attract mega container traffic on the main East-West shipping route, remain non-operative or merely cater to other needs and Vizhinjam does not have the wherewithal to buck this trend.

The report notes Vizhinjam port will face competition from Colombo port which holds an upper hand because of its strong relationships with shipping lines and shippers and superior logistical networks.

Another major challenge to Vizhinjam has been raised by Adani Group itself with its investment of close to Rs 6,000 crore in the Western Terminal of Colombo Port, along with the US International Development Finance Corporation’s co-investment of US$553 million. Compared to Colombo, Adani Group has a relatively lower investment in Vizhinjam.

The planned International container transhipment port at Great Nicobar Island with an investment of Rs 41,000 crore – for which the Centre has solicited bids – will also pose formidable competition to Vizhinjam, the report notes.

The report states that ports that lack strong ties to the local economy are unlikely to be economically sustainable and Vizhijinam’s hinterland situation falls short of expectations.

The report notes that the Vizhinjam seaport is poised to drain the finances of the Kerala government, and it will not affect the Adani group at all. Because the project agreement has provisions to increase the concession period if the traffic falls below the target by two per cent.

Initially, it was agreed that the 3.1-kilometre breakwater and fishing harbour would be constructed by the concessionaire but the entire tab of Rs 1,463 crore would be picked by the Kerala government. The cost of external infrastructure, Rs 1,973 crore, was also to be funded fully by the Kerala government. All of this together will add up to Rs 7,525 crore.

Of this, the Kerala government's investment would be Rs 5,071 crore and that of Adani, Rs 2,454 crore; a 67:33 ratio favourable to Adani Ports. Though Kerala makes close to 70 per cent of the investment, Adani needs to start paying a minuscule concession fee of Re 1 per annum and an additional concession fee of one per cent of the total Realisable Fee only from the 15th anniversary of the commencement of operations.

In the feasibility report done by Ernst & Young, consultants appointed by VISL, Adani Ports would recoup its investment of Rs 2,454 crore by the 11th year.

What's more, the concession agreement allowed Adani to utilise 30 per cent of the land acquired for the project by the Kerala government for what has been termed “Port Estate Development”, which may include residential and commercial buildings.

Therefore, the study notes that when the government falls into deep debt, the Adani group will benefit hugely as it will utilise the land within the port estate for commercial activities and capitalise on the scenic beauty of the area. Eminent historian Ramachandra Guha will release the report in Thiruvananthapuram on World Fisheries Day on November 21.