By – Adityaa Kondury
Abstract
Historically, India’s maritime trade relied on global transshipment hubs like Colombo, Singapore, and Jebel Ali. Despite the world’s fifth-largest economy and a vast coastline it historically watched nearly 75% of its container transshipment cargo pass through feeder ships to foreign hubs. This dependency on foreign ports added upwards of $100 per container in extra logistics costs but also delayed turnaround time and exposed India’s trade to supply chain disruption. While also leading to inefficiencies which resulted in an annual economic loss of USD 200–220 million for the Indian side. In a bid to restrict this capital flight and reclaim its maritime sovereignty in the Indian ocean. India constructed and operationalized the Vizhinjam International Seaport in Kerala. On one side, this project undoubtedly aligns with India’s bid for strategic self-reliance, but on the other side the project’s underlying fiscal balance is not favourable. The coming years will test India’s maritime resilience as it navigates these murky competitive waters.
Introduction : Why does India need the Vizhinjam port?
India was previously heavily dependent on foreign ports for most of its transshipment needs. Until recently, nearly 75% of India’s transshipment cargo was handled through overseas hubs such as Colombo, Singapore, and Port Klang 75% of India’s transshipment cargo. This translates to approximately 3 million TEUs (Twenty – Foot equivalent) of Indian cargo, which was routed abroad annually through feeder ships transshipment hubs. This combined resulted in US$200–220 million in lost transshipment revenue for Indian ports and an additional US$80–100 per container in logistics costs for exporters and importers 3 million TEUs; US$80–100 per TEU. Beyond this capital outflow, India’s strategic autonomy and maritime sovereignty was compromised.
The Hambantota Wake-Up Call
The crisis at Sri Lanka’s Hambantota port, which was driven by high-interest infrastructure loans, created debt distress and forced the Sri Lankan government. To restructure its debt, and reduce the debt burden, Sri Lanka had to lease Hambantota to Beijing for 99 years. This strategic acquisition served as a massive maritime wake-up call for New Delhi, as this acquisition gave China the ultimate leverage to bottleneck India’s feeder ship shipments while also allowing it to closely monitor Indian Navy movements.
Vizhinjam’s Strategic Advantage in Maritime Transshipment
With the construction and operationalization of the Vizinjamm port which has a natural draft of 20 meters, Ultra Large Container Vessels (ULCVs) are able to dock without the need for modifications, this helped India reduce its dependence on feeder ships and problems associated with it. In fact, Vizinjam has been capable of handling the largest container ship MSC Irina and other icon class vessels like MSC Türkiye and MSC Michel Cappellini which highlight its leverage and because Vizhinjam is situated at a mere 10 nautical miles from the international East-West shipping route. By eliminating the necessity to navigate deep into the Arabian Sea or the Bay of Bengal, Vizhinjam serves as a strategic port for vessels transiting between Europe, the Middle East, and East Asia. This also allows India to have a structural advantage in global logistics. It was also beneficial in providing approximately 5500 direct jobs and well connected transportation; the investment was a long term deal rather than a short term speculative attempt.
The Cost of Ambition
While the strategic mandate and need for Vizhinjam is undeniable, its financial structure remains a subject of intense debate. The project operates under a Public-Private Partnership (PPP) model driven by the Adani Group. The controversy surrounding Vizhinjam centers on who is bearing the cost, and who stands to benefit?
According to project data, Phase 1 alone consumed ₹8,867 crore. Of this, the Kerala State Government shouldered the most, contributing ₹5,595 crore (roughly 63%), While the Adani Group invested ₹2,454 crore (28%) and the Central Government provided the remaining funds via Viability Gap Funding (VGF) that was around ₹817.80 crore to bridge the commercial deficit. The need for VGF in this mega project highlights the reality that, despite Vizinjam’s geographic advantages, the mega-project required massive public capital to be commercially attractive to private developers.
The revenue-sharing structure is also a matter of intense debate as until 2034, Kerala Government’s direct earnings are essentially limited to GST collections and even after 2034, the state will receive a mere 1% of cargo revenue, a figure that slowly scales up to 40% by 2060 when the operator’s tenure concludes, shows a classic case where the state pays the upfront cost, but the private entity gets the immediate and short term benefit from operationalization of the port.
Regional Competition
Vizhinjam is not the only transshipment port in South Asia, it is among the newest and does not operate with a first mover advantage, it is entering a fiercely contested market. In 2025, the Port of Colombo set a historic record with an 8.29 million TEU throughout, functioning as the primary transshipment hub in the Indian Ocean. Further east, Singapore still remains the global leader in maritime cargo as it has handled over 44.66 million TEUs for 2025 and poses advanced technologies
Against these well established ports, 1 million TEU appears modest considering it is one of the largest port projects in India. However, Colombo is currently operating near its maximum threshold and suffering from congestion. To effectively compete and generate revenue, Vizhinjam must quickly execute its environmental master plan and scale up subsequent phases to develop an impenetrable hub-and-spoke feeder network.
Cost-Benefit Analysis
- Fiscal Efficiency: Kerala Government’s substantial ₹5,595 crore contribution represents a significant long term investment and revenue capped at 1% until 2034, the state’s payback period is very long until the port picks up operation, And considering the state government needs to further develop cargo terminals and infrastructure and its resources would be strained and as the state is subsidizing private logistics operations.
- Macroeconomic Externalities: The port helps reduce the $200-220 million expenditure annually and with a reduction in logistics costs by up to 30% Indian exporters can leverage a competitive edge in the global market.
Overall Analysis
The operationalization of Vizhinjam is an important step toward ending India’s maritime subordination. This port acts as a stepping stone for future maritime projects, as it was necessary to stop the annual $200 million economic loss, increased turnaround times, and the potential geopolitical risks of Hambantota. With additional projects planned, such as the Great Nicobar Project, this port allows India to improve its interoperability while using its strategic location to attract opportunities for refueling and direct cargo exchange, eventually moving towards a hub-and-spoke model which could generate additional revenues. Additionally, considering the geopolitical premium, the revenue sharing may not be ideal in the short run; however, in the long run, as the operator’s term comes to an end, Kerala government would gain a decent share of 40% and revenue share from port operations.
Conclusion
The Vizhinjam International Seaport represents India’s major and calculated attempt to achieve maritime dominance in the Indian Ocean. By utilizing its 20-meter natural depth and strategic proximity to global shipping lanes, India has developed and is further expanding a port mechanism to retain billions in domestic capital and push back against the foreign monopolization of South Asian trade routes.
Despite these positives, the project has a skewed financial distribution as public funds overwhelmingly handle Phase 1 costs while the private operators gain the early-stage revenues. For Vizhinjam to be a masterstroke rather than a subsidized private asset, it must rapidly expand to phase 2 beyond its current capacity of 1 million TEUs and cultivate a feeder network to siphon traffic from busy port of Colombo, it should simultaneously initiate the development of local industrial corridors in order to truly command a position in the busy market. The coming years will reveal whether this project which was constructed despite known fiscal imbalance will translate into real opportunities or if Vizhinjam will end up as a massive loss for public funds, especially for the Government of Kerala.
About the Author
Adityaa Kondury is a third year Economics student at Jindal School of Government and Public Policy (JSGP) and a member of the Economics and Finance cluster of Nickeled & Dimed. He is an avid reader of the global markets and is passionate in exploring the realm of financial markets, investing and international economics. He also has a keen interest in geopolitics, risk assessment, maritime politics and cryptocurrency.
Image source: https://www.prokerala.com/news/photos/newly-inaugurated-vizhinjam-international-deepwater-multipurpose-seaport-3727985.html