KERALA PORTS
Public Private Partnership

Project and Infrastructure Finance

JOBIN T JAMES
14DM024

Kerala is constructing two port projects worth over Rs 6,200 crore under the public private partnership (PPP) route. The state government completed one port project worth over Rs 700 crore under PPP and it has been put to service delivery, a study conducted by the Associated Chambers of Commerce and Industry of India
(Assocham) shows. The industry body released the report titled 'Port Developments in India'.
DS Rawat, Secretary General of Assocham said 62 projects in the port sector worth over Rs 82,000 crore are in different stages of implementation under the PPP model. To put it in perspective, in all 881 PPP projects worth over Rs 5.4 lakh crore are taken up across India in different sectors.
While there are 31 completed port projects worth over Rs 24,700 crore, about 21 PPP projects in the port sector with a share of 52 percent worth over Rs 43,000 crore are under construction, eight projects worth about Rs 14,000 crore with a share of about 17 percent are under bidding.

International Container Transhipment Terminal
Vallarpadam Terminal
The Kochi International Container Transhipment Terminal (ICTT), locally known as the Vallarpadam
Terminal. is a container trans-shipment facility which is part of the Kochi Port. It is the only trans-shipment port in India, and is situated in Kochi, in the state of Kerala.The terminal is biggest in its kind in South Asia
Being constructed in three stages, the first phase of the terminal was commissioned on Feb 11, 2011. This can handle cargo up to one million TEUs (twenty-foot equivalent units) per annum. On completion of the third phase, the terminal will be able to handle 4 million TEUs of cargo per annum. The terminal is presently being operated by the Dubai Ports World (DPW), which will operate it for 30-years after which the control will come back to the Cochin Port Trust.

On 16 February 2005, Dubai Ports World announced that it has formally signed an agreement with the CoPT to construct, develop and operate an International Container Transshipment Terminal (ICTT) – An India
Gateway Terminal – at Vallarpadam.
The project was formally launched with the laying of the foundation stone by Mr. Manmohan Singh, the
Hon’ble Prime Minister of India. The ceremony was attended by Dr. Jacob Thomas, Chairman, CoPT and
Mr. Sultan Ahmed Bin Sulayem, Executive Chairman, DP World. The proceedings were overseen by His
Excellency, the Governor of Kerala, Mr. R.L. Bhatia, the Hon’ble Minister of Shipping, Government of
India, Mr.T.R. Baalu,and the Hon’ble Chief Minister of Kerala, Mr.Oommen Chandy.
Approval for the agreement was given by the Cabinet Committee of Economic Affairs of the Government of India, Ministry of Finance and meanwhile, the DP World will manage and subsequently transfer its operations at the Rajiv Gandhi Container Terminal in Cochin Port to the new terminal upon its completion.
The DP Worldhas been granted a 38-year concession for the exclusive operation and management of the site. Vallarpadam Terminal is the largest single operator container terminal in India and the first in the country to operate in a special economic zone. The terminal makes kochi a key centre in the shipping world reducing
India ’s dependence on foreign ports to handle transshipment. In the first phase there will be 600 m Quay length and a draft of more than 15 m , when the terminal may handle 1 million TEU container annually by the end of 2012.
In the second phase the capacity will be enhanced to 3 million TEU's by the end of 2014. In the third phase the terminal may handle even up to 5.5 million TEU's. The total cost of the project is estimated at Indian
Rupee 3200 crore.

DP World has estimated that the total initial investment required will be approximately US$20 million which includes the immediate provision of four RTGs and two Mobile Harbour Cranes to the Terminal -to improve yard handling, truck turnaround time and quayside operations.
Strategically located on the main east-west global shipping lines and offering draft of about 16 m, Cochin is destined to develop as the premier gateway to southern India, as also offering an alternative to Sri Lanka and
Singapore for containers being transshipped for the Indian market.

Vizhinjam port
International Finance Corporation (IFC) is advising Government of Kerala on structuring and implementation of a Public Private Partnership (PPP) project for development of Vizhinjam port. IFC and
Government of Kerala are interested in the evaluation of the market potential for cargo handling at the proposed new port and the opportunity for private sector participation in the project development and implementation. Government of Kerala is keen to develop Vizhinjam port on the PPP model and its main objectives include:
• Development of modern deepwater port facility to improve the state’s transport infrastructure.
• Facilitating trade and attracting investment in the state.
• Promoting private sector participation in port and transport sector.

Phase 1
FY 14-20

Phase 2
FY 21-FY 30

Phase 3
FY 31-FY 44

Gateway Container Traffic (mn Teu)

0.1

0.4

0.8

Transshipment container Traffic (mn Teu)

0.7

1.3

2.1

Bulk Traffic (mn Tons)
Cruise vessels (no.)

0.6

1.3

2.6

30

60

120

Sub Total excluding cruise (million tonnes)*

12.5

25.7

43.5

No. of Container Berths

2

2

3

No. of General Cargo Berths
No. of Cruise Berth
No. of Liquid Berth

1
1
-

1

1
-

Sub Total

4

3

4

Infrastructure

110.3

46.2

178.8

Superstructure
Land Reclamation

14.0

9.6

52.7

43.1

30.3

98.7

Berth and Equipments

169.7

213.6

399.6

Sub Total

337.1

299.7

729.8

Terminal Year Base Case Traffic

Port Configuration (No. of Berths to be added)

Estimated Investment (Mn USD)**

PV of estimated investment (@10%)**

337.1

153.8

144.4

Estimated cumulative revenue for each phase from all sources in base case (USD Million) **

188.3

965.6

3,826.7

PV of estimated revenue (@10%)**

119.0

279.3

358.0

Note: * 1 Container = 14.5 tonnes (Base Case)

Vizhinjam is an all-weather port located on Southern tip of Indian Peninsula, just 10 nautical miles from the International Shipping Lane, making it capable of tapping the lion’s share of Indian transshipment cargo, now being largely handled by Colombo. So once the port is up, Indian exporters will not have to rely on foreign ports for trans-shipment of cargo. It is expected to save at least ? 1000 crores in expenditure annually.
Vizhinjam port is endowed with a natural seawater depth of up to 24 m as close as one nautical mile from the seacoast. Due to this natural depth, Vizhinjam can attract the largest container vessels currently in operation and also the future mega container carriers. Vizhinjam lies Central to the eastern and western coast lines of India and thus can cater to the needs of both west and east coast. The project cost and maintenance cost will be minimum as the site needs minimal capital dredging. Availability of 20m contour within one nautical mile from the coast would facilitate flexibility of shipping operations.
The first stage would involve the construction of a breakwater stretching a length of 3,030 metres. Two mammoth container ships of 18,000 teu (twenty-foot equivalent units) would be able to anchor at the 800metre-long berth to be built for transhipment vessels. The first stage will have birthing facilities not only for big container ships, but also for the Indian Navy and the Coastguard, besides a cruise terminal. The total project expenditure is pegged at Rs 6,595 crores over three phases and is proposed to follow the landlord port model with a view to catering to passenger, container and other clean cargo. Phase I is estimated to cost
Rs 3,040 crore. Adani Group would invest Rs 2,454 crore and has sought a grant of Rs 1,635 crore from state and central governments. The balance amount is proposed to be raised as Rs 1,130 crore equity from
Government of Kerala and as debt through loans from banks/ institutions and through bonds. The proposed port is a Green-field project, away from urban/city limits, and thus can be masterplanned and shaped by the developer as per his own efficient designs and needs into an efficient, modern and highly productive port.
No acquisition of land is needed for the port as it will come up in the land reclaimed from sea. Hence, there is very minimal rehabilitation and resettlement issues. Vizhinjam has excellent connectivity to rail (10 Km), national highway (3 Km) and internationaol airport (15km). Vizhinjam offers immense scope for tourism infrastructure development in future due to its proximity to international tourist destinations like Kovalam(3 km) and Poovar(15 km).
As is the case with most developmental projects in Kerala, Vizhinjam port project too was dogged by controvery before and after the finalisation of the lone bid submitted by Adani Ports and Special Economic
Zone Ltd. Gautam Adani’s well-known proximity to Prime Minister Narendra Modi made him suspect in the eyes of both the Congress-led ruling dispensation and the CPM-led Opposition.
The CPM leaders wanted the Oommen Chandy Government to go for a re-tendering of the project, but the
Government didn’t relent. With the Opposition training its guns on Adani and the State Government dithering, what clinched the deal in favour of Adani was an open threat held out by Union Shipping Minister
Nitin Gadkari that the project might be moved to Colachel in Tamil Nadu if the political differences in the state over awarding the project to the Adani Group was not resolved fast. That blunted the Opposition criticism and prompted the Kerala Government to give its nod for the bid submitted by Adani Ports and
Special Economic Zone Ltd.
Controversy stalks the project even after approving the bid in favour of Adani Group . The Opposition alleges that the deal is a complete sell-out. The Opposition says the Government has given land worth Rs 6,000 crore free to the Adani Group, but Chief Minister Oommen Chandy maintains that only a licence to use the land has been given to the implementing company.

The Opposition questioned the decision of the Government to award the contract for port operations to the
Adani group for a period of 60 years when most other ports in the country had tied up with private operators only for 30 years. Also, the Government is yet to disclose whether the Vizhinjam port would revert to the
State on completion of the 60 years, the Opposition says.
“Honestly, Kerala’s biggest bane is its petty politics. For some reason, there are noices against the project from the Left and others because Adani is seen as close to the Centre, but everything has been transparent in the process here. This is one the most crucial projects in the entire nation’s interest,” says Shashi Tharoor,
Thiruvananthapuram MP.