Adani-MSC's Vizhinjam deal hits a snag. Kerala to scrutinise five key aspects

Adani Ports' deal with container giant MSC may just have hit a roadblock.

The Kerala government on Wednesday signalled that Adani Ports and Special Economic Zone's (APSEZ) proposed sale of a 49 per cent stake in Vizhinjam port to Mediterranean Shipping Company (MSC) could face scrutiny. It asserted that no ownership change can take place without the state's prior approval.

Responding to a special submission by Leader of the Opposition Pinarayi Vijayan in the Assembly, Chief Minister V D Satheesan said the government had learnt about the proposed transaction through media reports and had not received any formal communication from APSEZ.

On Tuesday, the APSEZ announced that Switzerland-based MSC, the world's largest shipping and logistics group, would acquire a 49 per cent stake in Adani Vizhinjam Port Private Limited (AVPPL), the concessionaire for the Vizhinjam International Seaport, for about $1.4 billion.

Must Watch: Adani Ports Gets $1.4 Billion Boost As MSC Buys 49% Stake In Vizhinjam Port

APSEZ valued the transaction at $2.85 billion and described it as the largest foreign private investment in Indian port infrastructure.

Government cites concession agreement

Satheesan told the Assembly that Adani Ports had not communicated anything to the Kerala government regarding the proposed transaction. 

"No letter or information has been given to the Government," he said.

Quoting Clause 5.3 of the concession agreement, the chief minister said: "The concessionaire shall not undertake or permit any change in ownership without the prior approval of the Authority."

"The Authority is the Government of Kerala," he added.

Satheesan said that under the Companies Act, transfer of more than 25 per cent equity amounts to a change in ownership and therefore cannot proceed without the state's approval.

"The proposal has not yet come before the government. When it comes, we will examine it," he said.

Five factors under review

The chief minister said the government would assess the proposal on five parameters - national security, public interest, fair competition, investment, and the port's long-term development.

He also noted that approvals from the Union Ministry of Shipping and the Union Ministry of Home Affairs would be required because Vizhinjam is a strategically important asset.

"The most important issue we must pay attention to is that there should be a common user facility...There must not be a monopoly where only one company has exclusive access," Satheesan said.

He stressed that the port must remain accessible on a non-discriminatory basis to all shipping lines, vessel operators, exporters, importers, freight forwarders and other stakeholders.

"There must be a common facility that everyone can use. It must remain a common user facility and should not become the exclusive preserve of one company," he said.

Noting that MSC is not merely a financial investor but one of the world's largest container shipping companies and terminal operators, Satheesan said: "Therefore, we must carefully examine how they intend to use this facility."

Opposition raises monopoly concerns

Vijayan too urged the government to scrutinise the proposal carefully. "When I saw the news reports, I doubted as to whether the state government was also aware of it...The Chief Minister's clarification has addressed that concern," he said.

Vijayan argued that MSC's dual role as a major shipping line and a prospective part-owner of the port could distort competition. "If that shipping company also becomes a joint owner with the concessionaire, which is the port operator, then a new form of monopoly will be established here," he said.

He warned that exporters from Kerala could become dependent on a single company's vessels and containers, allowing it to influence freight rates, while also affecting competition, port-based industries and future logistics investments.

Vijayan further said the arrangement could have implications for the state's long-term revenue interests, given Kerala's stake in the project.

Tharoor backs investment, seeks safeguards

Reacting to the deal on Tuesday, Congress MP Shashi Tharoor welcomed the investment but called for due diligence.

"Significant news for Vizhinjam: Adani Ports has signed a $2.85 bn agreement with MSC's Terminal Investment Ltd, the world's largest container line, for a 49% stake in AVPPL, the single largest foreign private investment in Indian port infrastructure," Tharoor wrote on X.

"#Vizhinjam Port crossed 2 million TEUs in just 18 months; this should accelerate Phase 2 and cement its place as a global transshipment hub," he said.

At the same time, Tharoor said that "a transaction of this scale involving a strategic asset deserves due diligence, not just applause".

He pointed out that under the concession agreement, any ownership change above 25 per cent requires prior approval from the Kerala government and said it was important that Vizhinjam remained "a non-discriminatory, common-user port" offering fair access and tariffs to rival shipping lines even if MSC became a part-owner.

"Done right, this cements Vizhinjam's future, to Kerala's lasting benefit. I'll continue engaging with the State Government and the AVPPL on this," Tharoor said.

(With inputs from PTI)