The Adani Group’s decision to transfer its stake in the Vizhinjam Port to MSC (Mediterranean Shipping Company) has sparked controversy, with the Kerala Government reportedly viewing the move as a possible violation of its concession agreement with the state.
According to the 2015 concession agreement, Adani Ports may transfer up to 74 per cent of its stake to another company after one year of the port’s operation. However, it is required to obtain prior approval from the Kerala Government before doing so.
The Adani Group wrote to the Secretary of the State Ports Department on Wednesday seeking permission to enter into a joint venture with MSC. The letter, dated July 1, stated that an agreement had been signed with MSC’s Terminal Investment Limited (TiL) on June 29 for the operation of the port and requested the state’s approval for the arrangement.
Adani Ports sought the Kerala Government’s approval after signing a $1.4 billion deal to transfer a 49 per cent stake in the Vizhinjam Port to the MSC Group. Since the concession agreement requires the state government’s approval for the transfer of more than 25 per cent of the shares, the Kerala Government reportedly considers the deal a breach of the agreement.
Meanwhile, Kerala Chief Minister V.D. Satheesan is reported to have expressed dissatisfaction over the Adani Group proceeding with the agreement without informing the state government or obtaining its prior approval.
It is learnt that the state government will seek an explanation from the Adani Group for signing an agreement with a foreign company without prior permission. If foreign investment is involved, approvals from the Union Home Ministry and the Ministry of Defence may also be required. The Centre’s position on issues related to national security is also expected to be significant.
The concession agreement stipulates that any transfer of Adani Ports’ shareholding must safeguard the public interest. Vizhinjam Port is a public infrastructure asset operated by a private company, and equal opportunities must be ensured for other businesses operating in the maritime sector. There are concerns that if MSC acquires a substantial stake in the port, it could lead to a monopoly.
MSC, one of the world’s largest shipping companies, has an extensive global network in port-based trade. It also operates container freight services, warehouses, logistics companies, and trucking services. It is being pointed out that if the company comes to dominate both maritime and land-based logistics in Kerala with Vizhinjam as its hub, it could be detrimental to the country’s industrial interests.
The Kerala Government is planning to transform the state into a major maritime trade hub through its Mission Samudra initiative. Public sector organisations such as the Container Corporation of India and the Central Warehousing Corporation are already preparing to establish logistics and warehousing facilities at Vizhinjam. However, there are growing concerns that if global shipping giants monopolise the market, other investors may be discouraged from using Vizhinjam Port as a base for their operations.
The Kerala Government is also planning to constitute a committee of port-sector experts to examine the proposed share transfer. The report of the government-controlled Vizhinjam International Seaport Limited (VISL) will also be taken into consideration. The Adani Group has not specified any deadline for granting approval in its letter.