Thiruvananthapuram: The race to complete the final phase of the Vizhinjam International Seaport by December 2028 is high-stakes for Gautam Adani's Adani Ports, as meeting the deadline will make the company eligible to seek a 20-year extension of its concession, subject to the Kerala government's approval.

The prospect of securing a 20-year extension of its concession is one of the key factors behind Adani Ports' decision to secure investment from shipping major Mediterranean Shipping Company (MSC) for the project's final phase. Instead of funding the expansion through borrowing, the company has chosen to raise capital through equity. This move is also expected to significantly boost the port's revenues as MSC plans to establish Vizhinjam as one of its principal transhipment hubs.

Under the original concession agreement signed in August 2015 during the tenure of the Oommen Chandy government, Adani Ports was granted the right to operate the port for 40 years from the date it took over the project, fixing the concession period until 2055. However, delays in completing the first phase of construction led to arbitration proceedings between the state government and Adani Ports during the previous LDF government's tenure.

The dispute was resolved through a supplementary agreement signed in November 2024. As part of the settlement, the Kerala government condoned the delays attributed to Adani Ports, while the company withdrew its arbitration claims. In return, the concession period was extended by five years, which effectively pushed its expiry from 2055 to 2060.

The 2015 concession agreement also provided that if Adani Ports completed the port's capacity augmentation within 30 years, by 2045, it would become eligible for an additional concession period of up to 20 years beyond the original expiry in 2055. However, the extension would require the consent of both the state government and the company.

Recognising the commercial potential of Vizhinjam, Adani Ports has committed in the supplementary agreement to achieving the port's full planned capacity by December 2028. With the revised agreement extending the concession period to 2060, meeting this commitment would enable Adani Ports to seek a further extension until 2080.

If the concession is not extended, Adani Ports will be required to hand over the port, along with all assets and investments made at the facility, to the Kerala government in 2060. The state government can then either award a fresh concession to Adani Ports or select a new operator through a competitive bidding process.

Stake transfer may take up to six months
The agreement between MSC and Adani Ports provides for the acquisition of a 49% stake in Vizhinjam Port. Details of the transaction were disclosed after securing approval from the Securities and Exchange Board of India (SEBI).

The next step is to seek the Kerala government's approval by submitting an application along with the details of the agreement. Once the state government clears the proposal, approvals from central agencies, including the Competition Commission of India (CCI), will also be required. The entire process is expected to take up to six months, following which the transfer of stakes can be completed.

Vizhinjam Port: Cost and funding at a glance
First phase
Total project cost: ₹8,867.14 crore
Construction cost: ₹4,089 crore
Total Viability Gap Funding (VGF): ₹1635 crore (government support provided to offset the risks associated with the project.
Kerala government's contribution: ₹5,595.34 crore (includes expenditure on the breakwater, rail and road connectivity, rehabilitation, livelihood compensation, VGF, land acquisition and other associated costs)
Adani Vizhinjam Ports' investment: ₹2,454 crore (towards port construction alone.
Central government's contribution: ₹817.80 crore as VGF ( the Kerala government is required to reimburse this amount)

Final phase
Proposed investment by Adani Vizhinjam Ports: ₹16,000 crore
Kerala government's expenditure so far: ₹3,085.52 crore

State's revenue share to kick in from 2034
The Kerala government will start receiving its share of revenue from the port in 2034. The state's share will be linked to a percentage of Adani Ports' annual earnings from various user fees collected at the port. The revenue share will increase by one percentage point every year until it reaches 40%, after which it will remain unchanged.