The Cabinet meeting on Thursday gave approval to enter into a conditional tripartite agreement for availing the Viability Gap Fund of ₹817.80 crore allocated by the Central government for the development of the Vizhinjam International Seaport.
The decision was taken to speed up the development of the port and the completion of the second and third phases, while the deadline for completing the first phase of work was extended to December 3, 2024.
As per the terms of a concession agreement between the State and Adani Vizhinjam Ports Private Ltd (AVPPL) in 2015, the construction company AVPPL was supposed to complete the construction on the first phase of the work on December 3, 2019. However, the concessionaire could not complete the work on the first phase of the port within the deadline.
As the project could not be completed within the deadline, the concessionaire had invoked 16 force majeure reasons such as Okhi cyclone and 2018 flood to extend the project deadline. But Vizhinjam International Sea Port Limited (VISL), the special vehicle purpose for the development of the international transhipment container terminal at Vizhinajm, rejected the claims of the concessionaire and both parties started arbitration proceedings.
The Cabinet decided to enter into a tripartite agreement with the stakeholders considering that the arbitration proceedings would lead the project to endless litigation and delays, along with losing of viability gap funds sanctioned by the Centre. AVPPL has filed an arbitration petition seeking compensation of ₹3,854 crore, while the VISL raised a counter-claim of ₹911 crore. As per the decision of the Cabinet meeting, both parties should take steps to withdraw the arbitration proceedings.
As per the conditions put forth by the State, the State will waive the delay in the completion of the project based on the terms of the agreement and extend the agreement by five years with conditions. According to this, the completion date will be December 3, 2024. Further, the project concessionaire was supposed to complete the second and third phases of the project by 2045. However, it will be stipulated that the second and third phases will be completed by 2028, which requires an investment of ₹10,000 crore by AVPPL.
Completing the second and third phases of the project 17 years earlier than the original schedule will result in huge investment in a short period of time. During the five-year extension, the government has also decided to withhold ₹219 crore from the equity support due to the AVPPL as a commitment fee during this period. A sum of ₹175.2 crore of this deferred amount for four years will be returned to the AVPPL if the second and third phases of the project are completed by 2028. The State government will get an amount of ₹43.8 crore for one year.
In the meantime, revenue sharing between the State and the concessionaire will start as early as 2034 as stipulated in the agreement. The Cabinet also decided to proceed with further steps if the conditions are approved by the AVPPL and sign the tripartite agreement at the earliest.
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