Vizhinjam seaport: Kerala to seek damages from Adani group for construction delay

Adani fails to meet Sept 1 deadline for Vizhinjam port
Adani had said the port would be operational in 1,000 days.

The Kerala state government has issued a notice to the Adani Group for missing the deadline to commission Phase-1 of the International Multi-purpose Deepwater Seaport project at Vizhinjam.

The government had asked the company to speed up the construction of the project so as to meet the December 3 deadline. The company will get a grace period of three more months to finish the project. However, reports suggested that the chances look bleak. According to the concession agreement, if the company fails to complete the project during the grace period, it will have to pay the compensation amount mentioned in the contract.

Minister for Cooperation, Tourism and Devaswom Kadakampally Surendran said the government will seek damages if the construction does not complete.

As per the agreement, the state can seek 0.1 per cent of the performance guarantee of Rs 120 crore deposited by the Adani Vizhinjam Ports Ltd (AVPL), an arm of Adani group, to the exchequer. The damages will amount to Rs 12 lakh daily and Rs 3.6 crore monthly.

The Vizhinjam Seaport project was an ambitious Rs 7,525-crore initiative taken up by the Kerala government to cater to container trans-shipment besides multi-purpose and break bulk cargo.

AVPL commenced the construction of the port on December 5, 2015 after winning the bid during the previous Congress-led United Democratic Front government.

The port is being developed on a Public Private Partnership (PPP) model on a design, build, finance, operate and transfer basis. According to the official website of the seaport project, construction of phase-1 of the port was scheduled to be completed on December 4, 2019.

Though the Concession Agreement envisages a construction period of 4 years, the state government had set an ambitious target of 1000 days to make the port commercially operational.

The project got delayed due to cyclone Ockhi and the recent changes to the National Green Tribunal Act on mining leading to shortage of rock.

The AVPL has not sought an extension of the deadline to the government or given any explanation for the delay.

The Comptroller and Auditor General of India (CAG) had pointed to irregularities in the concession agreement. It also pointed that the interests of Kerala were not protected in the agreement with Adani Ports and SEZ Private Ltd.

CAG in its report on public sector undertakings for the year ended March 2016, said the technical and financial estimates prepared by external consultants were not scrutinised with due diligence resulting in inflation of cost estimates.

Total cost of the project was estimated at Rs 7525 crore. On this Rs 2454 crore is the investment by Adani group. Rs 1635 crore is the Viability Gap funding of centre and Rs 3436 crore by the state.

The CAG report had observed that the financial benefit accruing to the state was not commensurate with 67 per cent investment.

Stating that standard concession period for the PPP project was 30 years and by allowing 10 years, extra concession period in the agreement for Vizhinjam, the Concessionaire (Adani Group) would be collecting additional revenue of Rs 29,217 crore, based on revenue estimates in Feasibility Report by Ernst and Young.

A judicial commission appointed by the state government to look into alleged lapses in the Vizhinjam project however, gave a clean chit to the previous government after a probe into the matter.