Stocks of Adani Group going into a tailspin raises concern over Vizhinjam seaport development in Kerala

The case charged against billionaire Gautam Adani and seven others in an alleged multibillion-dollar bribery and fraud scheme in the United States has raised concerns about the commitment made by the Adani Group in Kerala in connection with the development of the Vizhinjam International Seaport.
| Photo Credit: Reuters

The case charged against billionaire Gautam Adani and seven others in an alleged multibillion-dollar bribery and fraud scheme in the United States has raised concerns about the commitment made by the Adani Group in Kerala in connection with the development of the Vizhinjam International Seaport.

Gautam Adani indicted in US bribery scheme LIVE

The port, which is billed to redefine Indian maritime business with its geographical proximity to the international shipping lane linking the maritime hubs in South Asia, Southeast, and West Asia, is scheduled to be commissioned in December this year (2024) or early January next. The latest controversy, it is believed, is likely to throw a spanner in the works for the second phase of the port’s investment over the next four years, which is an estimated ₹9,700 crore. 

However, in a conversation with The Hindu, a senior officer of the Adani Group downplayed the crisis. “Hardly ₹10,000 crore is required for the second phase of expansion of the Vizhinjam port and ₹1,300 crore for the redevelopment of the Thiruvananthapuram International Airport, which was taken over by Adani Group three years ago. This is not a big deal considering the financial position of the company. Further, this is not the first time panic has gripped the market with the company being falsely targeted by vested interests. We are sure that this too shall pass as in the past,” he said.

The Vizhinjam seaport project had missed several deadlines and was dragged into arbitration proceedings after the Adani Group failed to honour the provisions in the agreement signed between Kerala in 2015, according to which the port was to be commissioned in 2019. Later, the Kerala government walked the extra mile to bring the project on track by ending the arbitration proceedings against the port concessionaire halfway through, foregoing the ₹219 crore it was entitled to receive from the concessionaire for delaying the project for some five years.

Interestingly, the Kerala government, which develops the seaport under a Public Private Partnership (PPP) model with Adani Vizhinjam Private Port Limited (AVPPL), had maintained that the arbitration proceedings initiated against the Adani Group had to be withdrawn to make available the viability gap fund (VGF) of ₹817.80 crore allocated by the Central government to the AVPPL. But, in a recent development, the Centre asked Kerala to repay the VGF through revenue sharing, and this would cause an additional financial strain of ₹10,000-12,000 crore on the State government as the VGF would have to be paid back in net present value (NPV) terms through revenue sharing.

One of the conditions set by the State for extension of the deadline of the project to December 2024 was that the second phase of the port development should be completed by 2028, instead of the previous deadline of 2045. 

Not concerned about case: Ports Minister

Kerala’s Minister for Ports V.N. Vasavan told The Hindu that the Kerala government, which contributed ₹5,595 crore of the ₹8,867-crore project in the first phase, was not concerned about the latest case affecting the project as the work on the first phase was over and the trail run had seen the berthing of about 54 container vessels, including some really big ones.

The port, he said, had contributed over ₹8 crore to the exchequer by way of tax. It was also in their [Adani Group’s] interest to begin the second and third phases at the earliest as the port opened a huge potential for the country as evidenced in the trial run, Mr. Vasavan added. 

Opposition legislator M. Vincent, however, said that while the State had been confident in the group given their track record of developing ports over the years, the latest developments looked ominous for Kerala.