Vizhinjam row: Adani reiterates no breach; Kerala govt treads cautiously, Centre's stand crucial

The Kerala government is expected to proceed cautiously over the Adani Group's proposal to transfer a stake in Vizhinjam International Seaport to Mediterranean Shipping Company (MSC), following a political controversy over the move. In this scenario, the government may appoint an expert committee to examine whether approval should be granted for the proposed stake transfer.

Vizhinjam is a multi-operator port and a public infrastructure project operated by a private company. Under the concession agreement, all eligible players in the sector must be provided equal opportunity. Against this backdrop, the state government is expected to seek an explanation from the Adani Group over entering into an agreement without obtaining prior approval.

The Adani Group, however, has maintained that only a preliminary agreement has been signed with MSC regarding the proposed stake transfer.

Adani sends second letter to Kerala government

The Adani Group has sent a second letter to the Kerala government explaining the proposed transfer of its stake in the port. The communication comes after criticism that the state had not been informed in advance of the decision.

The company had submitted its first letter on Wednesday seeking the government's approval. The latest letter provides further details of the proposed transaction. It states that the concession agreement with the state government has not been violated and that no further steps will be taken until the required approval is obtained.

Centre's approval seen as crucial

The proposed change in shareholding at Vizhinjam also has national security implications, making the Centre's position significant.

As Vizhinjam is considered a strategically important port, any foreign investment requires approvals from the Union ministries of External Affairs, Home Affairs and Defence.

The Army, Navy, Air Force and the Indian Coast Guard are also planning to establish facilities at the port and have already sought land allocation from the state government.

The Union government has identified Vizhinjam as a key project in its plans to develop it into a global maritime hub.

Stake transfer clause part of original agreement

The concession agreement for the Vizhinjam port project was drafted in 2015 in line with the National Institution for Transforming India's (NITI Aayog) guidelines for public-private partnership projects. The provision permitting stake transfer was included in the original agreement signed during the tenure of the Oommen Chandy government.

A supplementary agreement signed in 2024 added conditions requiring the completion of the second and third phases of construction by 2028. It also stipulated that the state would begin receiving revenue from the project from 2034, irrespective of delays in construction. The 2024 agreement also decided to grant relief to the Adani Group from penalties linked to delays in completing the project.