Logistics

Adani allays concerns over Vizhinjam transhipment terminal after winning Colombo deal

P Manoj Mumbai | Updated on July 02, 2021

Karan Adani, CEO, APSEZ   -  Businessline

Blames force majeure events for overshooting the commercial operations date

Adani Ports and Special Economic Zone Ltd (APSEZ) said it “will continue” with the work on building an international container transhipment terminal at Vizhinjam in Kerala, allaying concerns that the project has lost its relevance with the firm announcing plans in March to set up a container handling facility in Colombo port.

The Vizhinjam facility is designed to cut India’s dependence on Colombo — a regional transhipment hub — to send and receive cargo containers entailing extra time and costs for exporters and importers.

Annually, around 3 million twenty-foot equivalent units (TEUs) of India-bound cargo containers are transhipped at neighbouring country ports especially Colombo, Singapore and other regional ports, according to official estimates.

Colombo, Singapore and Port Klang handle more than 85 per cent of this with Colombo alone handling about 2.5 million TEUs.

“Given the extra port handling charges incurred at the transshipment hubs, transshipment of cargo results in logistic cost inefficiencies for Indian industry. The additional port handling cost is to the tune of $80-100 per TEU, which could be saved if the container was imported/exported as direct gateway cargo instead of being transshipped,” the Maritime India Vision 2030, a ten-year blueprint for the maritime sector, pointed out.

Substantial opportunity

“This offers a substantial opportunity for the development of transhipment ports on the Indian coast. Hence, we believe that our strategic investment in an ultra-modern deep draft Vizhinjam container transhipment terminal at Kerala indicates an excellent business opportunity,” APSEZ said in its annual report for 2020-21.

Towards, strategic capacity addition, we will continue with the development work at Vizhinjam, it said.

According to the concession agreement signed on August 17, 2015, the port was slated to start operations on December 3, 2019 which could be pushed to August 3, 2020.

APSEZ has blamed force majeure events such as the cyclone Ockhi in November 2017, high waves, a National Green Tribunal order, the pandemic and reasons attributable to government authorities for overshooting the commercial operations date (COD) set by the concession agreement for the project.

Cyclone Tauktae impact

The firm is expected to use the cyclone Tauktae in May which damaged part of the breakwater, to justify further delay. Adani has constructed 850 metres of the total breakwater of 3.1 km. Cyclone Tauktae damaged the structure from 676 metre onwards.

The State government has the right to terminate the concession agreement on completion of extended COD and also levy liquidated damages at the rate of 0.1 per cent of the performance security amount for each day of delay in completing the project. This works to ₹12 lakh a day.

Adani Vizhinjam Port Pvt Ltd (AVPPL), the APSEZ unit developing the port, has initiated arbitration proceedings to resolve the disputes arising from the delay in completing the project.

The Vizhinjam project is entitled to receive a viability grant funding or VGF of ₹1,635 crore to be shared by the Centre (₹818 crore) and the Kerala government (₹817 crore) to boost its viability, making it the first port project to be offered such a grant. Of this, ₹1,227 crore will be given during the construction phase and the balance during the operation period spanning 40 years extendable by another 20 years.

The VGF was the basis on which the bid was awarded to APSEZ, which quoted the least grant.

Published on July 02, 2021

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