KOCHI: Former Kerala ports minister V N Vasavan has defended the previous LDF government's decision to waive delay-related penalties and amend the Vizhinjam International Seaport concession agreement, rejecting allegations that the move was intended to benefit Adani Vizhinjam Port Private Ltd (AVPPL).
The settlement was necessitated by international arbitration proceedings and the Centre's insistence that all disputes between the Kerala government and AVPPL be resolved before releasing its Rs817 crore share of the viability gap funding (VGF), Vasavan told businessbenchmark.news.
"The dispute had gone to international arbitration, with Adani Vizhinjam Port Private Ltd (AVPPL) also claiming compensation for the time lost due to the 2018 floods and the Covid-19 pandemic, arguing that the delays were caused by force majeure events beyond its control," Vasavan further explained.
"The Centre had made settlement of the disputes between the Kerala government and AVPPL a precondition for releasing its Rs817 crore share of the viability gap funding. There was nothing unusual or secretive about the settlement. Any government would have taken similar steps in the circumstances," he said.
The former minister's remarks came hours after Chief Minister V D Satheesan alleged that the previous LDF government had waived Rs219 crore in delay penalties payable by AVPPL and extended the concession period by five years, causing a corresponding extension in the company's right to operate the port.
Liquidated damages
Addressing a press conference on Tuesday, Satheesan said the concession agreement originally required the project to be completed in 2019 and prescribed liquidated damages of Rs12 lakh a day for delays. (liquidated damages means damages whose amount has already been agreed by the parties in the contract)
According to him, the project was eventually delayed by about five years, but the LDF government chose to waive the penalty instead of enforcing the relevant provisions of the concession agreement.
While acknowledging that some relaxation could have been considered for the periods affected by the 2018 Kerala floods and the Covid-19 pandemic, Satheesan alleged that the government eventually waived the entire amount due from AVPPL.
"The LDF government amended the concession agreement, extended the project completion deadline by five years and correspondingly increased the concession period from 40 years to 45 years.
It also waived the entire Rs219 crore payable by the company as penalty. What was the deal here?" Satheesan asked, hinting at possible impropriety.
Background
The Vizhinjam concession agreement originally envisaged completion of the port within the stipulated construction period, with liquidated damages applicable for delays attributable to the concessionaire.
However, the project encountered multiple setbacks, including cyclone damage, the devastating Kerala floods of 2018, prolonged local protests and disruptions caused by the Covid-19 pandemic.
AVPPL maintained that many of these delays qualified as force majeure events under the concession agreement and pursued compensation through international arbitration, while the Kerala government disputed parts of those claims.
The dispute was eventually settled through amendments to the concession agreement, under which the project completion schedule was revised and the concession period was correspondingly extended by five years.
The settlement also paved the way for the release of the Centre's Rs817 crore share of viability gap funding, which had remained pending until the disputes were resolved.
