1. Regional cafe: Knocking down the 30-year Vizhinjam jinx

Regional cafe: Knocking down the 30-year Vizhinjam jinx

Kerala CM Oommen Chandy should be able to cut through the maze of geopolitical, economic and social issues to pull the port through

By: | Published: June 23, 2015 12:06 AM

An out-of-the-blue confessional moment in the life of Marydasan, a fisherman from the coastal hamlet of Adimalathura on the southern tip of Kerala, has emerged as a turning point in India’s maritime trade. Marydasan, who has seen more turbulent seas than most others, chose to withdraw his complaint at the National Green Tribunal in Chennai in 2014, disclosing that he was coaxed “to sign some papers” to wreck the proposed Rs 7,525-crore Vizhinjam deep-seaport, near Thiruvananthapuram. He was earlier made to believe that the project would impact the lives of the fishermen.

“It was this revelation that perhaps speeded up the green clearance for the Vizhinjam port project. The project had seemed jinxed, the way it refused to take off for nearly 30 years,” says Kerala ports minister K Babu. Close on the heels of environmental clearance, the Indian government also decided to guarantee the viability gap funding (VGF) to Vizhinjam port to the tune of R800 crore. The VGF is envisaged to feed the capital costs in the proposed PPP.

As if in cue with the clearances from the Tribunal and the Centre, early this month the Kerala Cabinet decided to accept the sole bid submitted by the Ahmedabad-based multi-port operator Adani Ports and Special Economic Zone (APSEZ) to build the Vizhinjam International Multipurpose Seaport superstructure and operate the seaport. The port operator has sought R1,635 crore as grant for the project partnering the state. Phase 1 is estimated to cost R7,525 crore, of which the PPP will shoulder R4,089 crore. Of the R4,089 crore, 40% will be the VGF share of the Centre and the state government.

The project, partnered by the Adani group, is expected to be under way by November 1, 2015. The contract is for building port superstructure and operating the port for 40 years, including the first four years of construction. When completed, it would have the capacity to berth 18,000 TEU motherships.

Before clearing the project, the Congress-led UDF government tried to get political consensus from an all-party meeting on Vizhinjam port. The Left parties questioned the PPP mode in which the project was proposed to be developed and made allegations of corruption over the acquisition of land for the project. At that point, regardless of political unison, the state Cabinet gave a green signal to the bid by Adani group, as recommended by the Chief Secretary’s Empowered Committee.

“It was after Marydasan’s disclosure and the subsequent environmental clearance that we got the confidence that it would be possible to haul the project out of the controversies and get it on track, before the term of the UDF expires in mid-2016,” says Babu.

But what makes Vizhinjam the new focal point of the world’s maritime route radar? One, it is located barely 12 nautical miles from the busy Persian Gulf-Malacca shipping route and is an ancient port, dating back to Roman and Chinese trade. Two, Vizhinjam has the deepest draft (72 feet) in India and has a rocky terrain. These features afford savings on the regular dredging costs in commercial ports.

Consider this, India does not have too many ports with container handling capabilities beyond Mumbai, Mundra, Chennai, Kochi or Vishakhapatnam. Hardly any of these can host motherships that need the space of deep seaports. Given this supply situation, most of the container traffic in India is diverted to jumbo transshipment ports like Dubai, Singapore or Colombo, where the containers are shifted to smaller vessels to bring them to India.

A feasibility study on Vizhinjam port in 2005 had observed that the proposed deep seaport could bring about cost savings of R1,000 crore to exporters in India. If the time-cost escalations are adjusted, the savings could be much higher.

In the mid-1980s, the former port minister of Kerala, MV Raghavan, mooted the idea of Vizhinjam to the state assembly. It came out as a concrete project report first in 1991. “Those in infrastructure business have been asking why a port with so many advantages has not been developed earlier, even though it was proposed 30 years ago,” says AS Suresh Babu, CEO, Vizhinjam International Seaport Limited (VISL).

Two rounds of tenders have been completed. One flaw that the critics see in the present award of the bid is that the project might not be as commercially viable as projected, since there is just a single bidder. Earlier there was global attention on the Vizhinjam port tenders, in the hope there would be a long tenure for the private operator.

Several international infrastructural developers, including Chinese consortiums Kaidi Electric Power Co and Chinese Harbour Engineering Co, had been in the bidding ring. At one stage, about 22 firms—including Beckett Rankine, Marubeni Corporation, Giss-Eta and First Wallstreet Group and Consortium, Ital-Thai Development Company, Afcons Infrastructure, L&T ECC, IL&FS, Hili Company, Adani Ports and Essar Shipping—had collected RFQ (request for qualification) papers. Lanco Kondapalli and Zoom Developers were also among the bidders. Many bidders had sought a 100-year BoT tenure, while Kerala government insisted on a 30-year tenure. In earlier tenders, the project failed to pick up momentum because of national security issues relating to a foreign consortium and court cases.

Later, the state sweetened the offer to a 40-year tenure to revive investor interest.

The project had its enemies, too, both open and camouflaged. In terms of litigation, resort-owners were not the only local interest groups that viewed the port project with suspicion. The fears of the fishing community in Vizhinjam that “the proposed wharf and the freight traffic will play havoc with the availability of fish” are still alive. “It could rob the livelihoods of about 50,000 local fisher folk and the compensation and rehabilitation measures are yet to be addressed,” says Vicar-General Eugene Pereira of the Latin Catholic Church in Thiruvananthapuram. Further, the proposed deep seaport also has competition from Singapore and Colombo ports.

Kerala has repeatedly turned its back to big-billed infrastructure development, despite the presence of natural, ancient deep ports. But now it would be a brownie point for Kerala CM Oommen Chandy if his government is able to cut through the maze of geopolitical and economic and social issues to pull this through. In fact, it would be an impressive feat for the UDF if civil work on Vizhinjam starts in November. For infrastructure-starved Kerala, this is an unusual hour, where bold economic diplomacy rises up to shatter a 30-year old development jinx.

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