The Kerala government recently said that it would waive its share of the revenue generated from the Azhikkal Port for 35 years from the date of construction.
The minor riverside port in Kannur is expected to be transformed into a major greenfield port over a few years, as a part of the Sagarmala Programme, the flagship maritime project of India's Ministry of Ports, Shipping, and Waterways.
The state-owned Malabar International Port and SEZ Limited (MIPS) is one of the key organisations involved in this transformation, set to take place in three phases.
The state government, which will fork out Rs 3,000 crore just for the first phase of development, is expected to hold off on collecting revenue from the port for a proposed period of 35 years from the date of construction—5 years of construction and 30 years of operations.
The proposal is aimed at making the project more financially viable for private investors, a Maritime Gateway report said, citing officials at a recent Chief Secretary-level meeting.
The officials added that the earlier framework, which required the private partners to share revenue with the state from day one, was proving to be a problem, given the project’s equity internal rate of return (IRR) and the scale of investment it demanded.
The 35-year revenue holiday is therefore expected to attract more private partners, further ensuring the port's timely execution under the Public Private Partnership (PPP) model.
However, the state’s proposal to seek Viability Gap Funding (VGF) from the Centre for this project faces uncertainty, as the latter had already put forth a VGF for Thiruvananthapuram's Vizhinjam Port in the form of a loan, the report said, citing other unnamed sources.
When it becomes fully operational, the Azhikkal Port is expected to have a depth of around 14.5m, giving it the capacity to handle larger, Panamax-size vessels of around 4,500 TEUs. It will also have one 500m berth, in addition to two 300m berths.
Beyond maritime operations, the project is also set to boost industrial growth in the Malabar region, with plans for associated industrial parks and Special Economic Zones (SEZs).