Kerala offers 35-year revenue holiday at Azhikkal Port to attract private investors

In a major policy shift aimed at attracting private investment, the Kerala government has decided to forgo its share of revenue from the planned Azhikkal Port for 35 years from the start of construction. The state, which will spend more than ₹3,000 crore on Phase I development, will begin receiving revenue only after the proposed concession period of 5 years for construction and 30 years of operations.

The decision was taken at a recent Chief Secretary–level meeting, which approved amendments to the concessionaire agreement to make the project more financially viable for private partners. Officials said the earlier framework—requiring the concessionaire to share revenue with the state from day one—was proving a deterrent, given the project’s equity internal rate of return (IRR) and the scale of investment required.

By offering a 35-year revenue holiday, the government hopes to attract stronger interest from private developers and ensure the port’s timely execution under the Public-Private Partnership (PPP) model. However, sources cautioned that the state’s proposal to seek Viability Gap Funding (VGF) from the Centre faces uncertainty, especially since the Union government had extended VGF to the Vizhinjam Port only in the form of a loan.

A comparison with the Vizhinjam transshipment port highlights the more aggressive concessions being offered at Azhikkal. Under the existing concession with the Adani Group, Vizhinjam will begin sharing revenue with the state from the 15th year of operations, currently expected in 2034. The port has a 40-year build-operate-transfer (BOT) concession, with an option for a 20-year extension.

The Azhikkal Port project aims to create a deep-draft facility with 14.1 metres depth, capable of handling Panamax-class container vessels and ships in the 8,000–75,000 DWT or up to 5,000 TEU category. Beyond maritime operations, the project is envisioned as a catalyst for industrial growth in the Malabar region, with plans for associated industrial parks and special economic zones.

Given that Kerala’s own cargo volumes are insufficient to ensure rapid break-even, the state is seeking a strong private operator—similar to Adani at Vizhinjam—to help attract cargo from neighbouring regions. In particular, the export-import community in Coorg, including major coffee traders, is seen as a key potential user base for Azhikkal.

The Detailed Project Report (DPR) for the port has been prepared by HOWE Engineering Projects (India) Ltd and submitted by Malabar International Port & SEZ Ltd, the special purpose vehicle established to implement the project.