Why Adani Group's Vizhinjam Port can be a big deal

San Fernando, the 300-meter-long container vessel operated by Maersk arrives at Vizhinjam International Seaport on July 11

Almost a decade after construction began, Adani Vizhinjam Port has finally reached the trial phase on July 12, with final commissioning slated later this year. It is India's first transshipment port, a project promoted by the Kerala government in a public-private partnership with Adani Group.

Vizhinjam International Seaport is the largest private sector investment in Kerala. Adani Ports and Logistics, after winning the competitive bid, formed a special purpose vehicle (SPV), Adani Vizhinjam Port Private Limited (AVPPL), for the development of the project. AVPPL entered into a concession agreement with the Department of Ports, Government of Kerala, in August 2015. The construction commenced in December 2015.

Dubbed the ‘port of the future’, Vizhinjam is located at the tip of southern India in Thiruvananthapuram. This transshipment port is important because of its strategic location between the Suez Canal and the Strait of Malacca, which easily connects to Europe, the Persian Gulf, and the Far East.

Transshipment is the process of transferring cargo from one ship to another on its way to its final destination. Without passing through customs, this allows shippers to consolidate cargo from different origins and destinations, which saves shipment costs and time. Transshipment also enables shippers to access markets that are not directly served by their vessels and have limited port capacity.

Until now, container vessels from other countries haven't been able to dock at India’s ports, as none were deep enough to handle them. They halted at the ports of Colombo, Dubai and Singapore instead. Currently, 25 percent of India’s container traffic is transshipped en route to the destination. Despite India’s rising trade with the world, the country did not have a dedicated transshipment port, resulting in three-fourths, or 75 percent, of India’s transshipped cargo being handled by ports outside India.

The country will finally attract the world’s biggest container ships and become a part of the international maritime trade. The newly constructed Vizhinjam Port is the deepest motherport in India, with a water depth of 20 metres, and has the capacity to handle 10 lakh containers in the first phase.

On July 11, the port received its first mothership from the Xiamen port in China as part of a trial run. The 300-metre-cargo vessel, San Fernando, of the world's second-largest shipping company, Maersk, arrived with 9,000 twenty-foot equivalent units (TEUs). About 2,000 containers from the vessel will be offloaded at Vizhinjam. After the official inauguration today, the mothership will move to its next destination, Colombo.

After China, Singapore is the second-largest port and the largest transshipment hub. While Colombo too has been a gateway for shipping lines for transhipment volumes. But with this port being developed, India can take volumes from competitors. This will also bring incremental volumes to Adani Ports. Larger vessels with over 10,000–20,000 TEUs can be handled due to the deep draft of 20–23 metres, says Ankita Shah, vice president of research at Elara Capital.

“The importance of the transshipment port is determined by its ability to turn around cargo faster. So that is why it is being developed as an automated port. The current capacity is 1 million TEU as of phase 1 (15–20 million metric tonnes) and has the scope to increase to 6.5 million TEUs over the medium term,” she adds.

With a total investment of Rs 8,867 crore, including Rs 5,595 crore from the state government and Rs 818 crore from the central government, Vizhinjam Port will create over 5,000 direct job opportunities, Kerala CM Pinarayi Vijayan said in a tweet, also appreciating Adani Group’s efforts.

Since the beginning, the project has faced several implementation issues, natural calamities, as well as protests by locals. Vizhinjam Action Council, backed by the Thiruvananthapuram Archdiocese of the Latin Catholic Church, along with a large number of fishermen, raised objections and staged protests. They have been demanding to stop the construction work and a coastal impact study in connection with it. The protestors have alleged that the unscientific construction of groynes or artificial sea walls as part of the port was one of the reasons for rising coastal erosion.

According to Adani Group, the progress of the port also suffered due to various cyclones, the flood of 2018–19, local agitation, and the Covid-19 pandemic. Despite the challenges, from 2020 onwards the project showed progress.

The MP for Thiruvananthapuram, Shashi Tharoor, who was supposed to be present at the inauguration ceremony, declined to join the celebrations. “There has been no progress on the legitimate demands of the local people for compensation and rehabilitation of those whose lives and livelihoods have been affected. I sincerely hope that the pending issues and grievances of the local community will be visibly and satisfactorily addressed before the port commences its formal operations later this year,” he said in a tweet on July 11.

During his speech at the event this morning, Karan Adani, managing director of Adani Ports and SEZ Limited (APSEZ), said, “Although we are expected to complete Phase 1 in December this year, I am delighted to announce that we will complete the first phase much before that. As soon as we receive the environmental clearance and other regulatory approvals, the Adani Group will begin work immediately on the port’s remaining phases, and this could begin as early as October this year.”

He also mentioned already having 600 metres of operational dock length and preparing 7,500 container yard slots to accept cargo. “While we are expected to handle 1 million TEUs per year in Phase 1, we are confident that we will handle 1.5 million TEUs—50 percent more. By 2028–29, when all four phases of this project are completed, the Kerala government and Adani Vizhinjam Port will have invested a total of Rs 20,000 crore in this outstanding example of a large-scale PPP project,” he said.