Kerala Opposition flags monopoly risk in MSC–Vizhinjam Port deal

Kerala's Opposition has raised concerns over the possibility of a monopoly after Mediterranean Shipping Company (MSC) Group's terminal arm, Terminal Investment Limited (TiL), announced plans to acquire a 49 per cent stake in Adani Vizhinjam Port Private Limited (AVPPL), the concessionaire for the Vizhinjam International Seaport.

The Kerala government, which has invested ₹5,595.34 crore in the first phase of the transhipment port, is the designated "Authority" under the concession agreement. Any change in ownership beyond a specified threshold requires its prior approval.

On June 30, Adani Ports and Special Economic Zone Limited (APSEZ) announced that it had entered into a definitive agreement under which MSC Group, through TiL, would acquire a 49 per cent stake in AVPPL. TiL plans to invest $1.397 billion, representing its proportionate share of the project's enterprise value of $2.85 billion. The transaction is subject to customary approvals, including regulatory clearances from both the Kerala government and the Union government.

Interestingly, Chief Minister V.D. Satheesan told the Assembly that the state government came to know of the proposed MSC-Adani partnership only through newspaper reports. He said Adani Ports had not communicated with the government on the matter and that no file seeking approval had reached it.

Industry sources said the government's position stems from the fact that APSEZ's June 30 announcement was made to comply with SEBI's disclosure requirements and that the company is yet to approach the state government for the necessary regulatory approvals.

Vizhinjam, which currently has a capacity of 1.6 million TEUs, is expected to expand rapidly to 5.7 million TEUs by 2028 with fresh investment, including that from MSC. At present, nearly 99 per cent of the vessels calling at Vizhinjam belong to MSC.

Citing TiL's proposed acquisition of a 49 per cent stake, Opposition leader Pinarayi Vijayan argued in the Assembly that Clause 5 of the concession agreement requires prior approval from the Kerala government for any transfer of shares that results in a change in ownership. Under the agreement, the sale of more than 25 per cent of the equity is deemed a change in ownership.

"Yet, from today's reports, it appears as though the transaction has virtually been completed. The fact that such an impression has arisen is itself deeply worrying," he said.

Vijayan said the proposed partnership between MSC and Adani, which already operates the port under the concession agreement, could create a monopoly.

"That is where our concern lies. I believe this could prove detrimental to Kerala's commercial interests and to the future development of the port," he said.

He added that the transaction should also be examined from the perspective of national security and the state's larger public interest.

"While implementing the national security provisions, the opinion of the Central government may also be sought," he said.

Although Vizhinjam currently handles mainly transhipment cargo, export and gateway cargo are also expected to begin moving through the port. Vijayan argued that if MSC were to gain a dominant position, exporters from Kerala could effectively be compelled to ship cargo only through MSC-controlled containers and vessels.

"The consequence would be that industries would have no option but to accept the freight rates fixed by that single company. We need to carefully examine the implications of such a situation.

"Earlier, we had signed Memorandums of Understanding worth nearly ₹5,000 crore with public sector enterprises such as CONCOR and CWC. With this monopoly taking shape, logistics companies, container freight stations, inland container depots and other major players in the allied logistics sector may no longer find opportunities to grow in Kerala.

"Competition is the cornerstone of any growing market. By wiping out market competitiveness and replacing it with a monopoly, this move could seriously undermine Kerala's port-led development strategy," he said.

Vijayan, who served as Kerala's chief minister for a decade, said he had envisioned Vizhinjam evolving into a world-class multi-operator port.

"That was the direction of all our discussions. But if this is what is happening, it moves in exactly the opposite direction. Instead of becoming a multi-operator port, it may not even remain a port served by multiple shipping lines," he said.

He also warned that a monopoly could create opportunities for financial manipulation.

"If such a monopoly is created with a single company, should we not also worry that the revenue share due to the Kerala government from 2035 onwards could be artificially suppressed? That is another issue we need to be concerned about," he said.

Responding to the concerns, Chief Minister Satheesan said Clause 5 of the concession agreement clearly stipulates that the concessionaire cannot carry out any change in ownership without the prior approval of the Authority—the Government of Kerala.

"The proposal has not yet come before us for examination. When it does, we will examine it. During that examination, we will also consider the concerns raised by the Leader of the Opposition," he said.

The chief minister said protecting the public interest would remain the government's foremost priority.

"What we need to ensure is that there is a common user facility at the port—a competitive user facility. There must be a system that is accessible to everyone. A monopoly or exclusive control by any one company should not be allowed. It is the responsibility of the state government to ensure that this company does not acquire such a monopoly.

"All users must have non-discriminatory access. There are shipping lines, vessel operators, shippers, consignees, freight forwarders and many other stakeholders. Every one of them must have equal access to a common user facility. The common user facility should remain genuinely common and must not become the exclusive preserve of a single company under any circumstances," he said.

Satheesan noted that since MSC is not merely a financial investor but also the world's largest container shipping company and a major terminal operator, the government would closely examine the implications of its investment.

"The government will ensure five things,” he said.

"First, we will examine all national security aspects related to this proposal. Second, we will safeguard public interest by ensuring that the port continues to function as a common user facility accessible to everyone. Third, we will ensure fair competition so that all stakeholders have equal access to the port and its services. Fourth, we will promote investment. We want to encourage investment by all players, not just one company. Fifth, we will keep in mind the long-term vision for the development of Vizhinjam Port.”

CM added that only after protecting these five principles will this government examine the proposal and decide whether to grant approval.