Vizhinjam Port agreement not in favour of state: CAG

Comptroller and Auditor General of India has observed that interests of Kerala were not protected in the agreement with Adani Ports and SEZ Private Ltd for implementing the Rs 7525 crore Vizhinjam International Deepwater Multipurpose Seaport project.
CAG in its report on public sector undertakings for the year ended March 2016, tabled in the assembly today, said the technical and financial estimates prepared by external consultants were not scrutinised with due diligence resulting in inflation of cost estimates.
"The interests of state government were not protected adequately while drawing up the Concession Agreement", the report said in its conclusion.
Stating that standard concession period for the PPP project was 30 years and by allowing 10 years, extra concession period in the agreement for Vizhinjam, the Concessionaire (Adani Group) would be collecting additional revenue of Rs 29,217 crore, based on revenue estimates in Feasibility Report by Ernst and Young.

CAG report comes a day after CPI-M veteran and former Chief Minister V S Achuthanandan demanded a 'White Paper' from the party headed LDF government on the Vizhinjan port agreement inked during the previous Congress led UDF government.
CPI-M leader also alleged corruption in the deal of the project of which the work was formally launched in December 2015.

As per the agreement, Adani group was responsible for funding and development of dredging and reclamation of 53 acres of land from the sea, construction of berths and related infrastructure and operation of the Port.
Total cost of the project was estimated as Rs 7525 crore. On this Rs 2454crore is the investment by Adani group for and Rs 1635 the Viability Gap funding of Centre and state and Rs 3436 crore by the state.

With regard to the financial and economic viability of the project, the report observed that in spite of 67 per cent investment by the state, the financial benefit accruing to the state was not commensurate with its investments.
Vizhinjam port development was a dream project of the state for a long period as it was first proposed in 1991 when late Congress leader K Karunakaran was the Chief Minister. But it did not materialise due to various reasons.
The project got a push during the previous UDF government came to power in 2011 and agreement was signed with Adani groups under PPP route on Design, Build, Finance, Operate and Transfer basis (DBFOT).

LDF then in Opposition, had objected to implementing the project in private sector and had levelled allegations of corruption in the deal.
Chief Minister Pinarayi Vijayan had stated earlier that the government would implement the project as there was no option before it other than to execute the project inked by the previous UDF government.