Kerala CM Vijayan seeks Union FM's intervention in releasing VGF funds for Vizhinjam port without conditions

The Chief Minister pointed out in his letter that the Vizhinjam Port was the first Port project in the country to have received in-principle approval for VGF on 3rd February 2015 under the Scheme for Financial Support to Public Private Partnerships in Infrastructure.

The Empowered Committee constituted by the Department of Economic Affairs (Ministry of Finance) had recommended the project for final approval under the scheme at its 41st meeting for an amount of Rs 817.80 crore.

"However, for the availing of the VGF, the Empowered Committee laid down the condition that the VGF disbursed by the Government of India to the Concessionaire should be repaid by the Government of Kerala in Net Present Value (NPV) terms by way of premium (revenue) sharing, the Chief Minister said.

"Viability Gap Funding (VGF) is invariably provided as a grant, not a loan. Thus, the defining elements of any VGF are that the payment to the concessionaire is non-repayable, it is a one-time grant and it is over the construction period of the project,"

"In this case, the Government of India and the Government of Kerala, as the two project proponents, have jointly decided to give this grant to the Concessionaire. But to further stipulate the condition that one of the project proponents, viz.- the Government of India, will advance this money as a deferred 'loan' to the other project proponent viz.- the State Government, defies the rationale behind the VGF itself," He said in his letter.

He said that the Kerala government is investing resources to the tune of Rs.5595 crores out of the total project outlay of Rs.8867 crores.

"I am sure, Hon'ble Minister would appreciate that given the financial situation of a small State like Kerala with limited financial resources, this scale of investment involves tremendous sacrifice on the part of the State. In addition, as the repayment of Rs.817.80 crores is to be made on NPV basis, this would involve a further loss of Rs. 10,000 to 12,000 crores to the State Exchequer in actual terms, computed on projected interest rates and revenue realization from the port over the period of repayment."

The Chief Minister said in November 2023, the Department of Economic Affairs accorded in-principle approval for the Outer Harbor project of VOC Tuticorin Port. This project is also structured on similar lines as the Vizhinjam International Seaport project, However, the condition that the VGF must be repaid was not imposed in that case, he said.

"I seek your kind intervention for the release of the share of the Government of India in the VGF for the Vizhinjam International Seaport, without imposing the condition that the State must repay it later and help avoid the huge financial loss of approximately Rs. 10,000 to 12,000 crores in nominal terms to the State Exchequer," he said. (ANI)