Kerala Chief Minister Appeals to PM Modi for Relaxation of VGF Conditions for Vizhinjam Port
Click to start listening
Thiruvananthapuram, Dec 14 (NationPress) Kerala Chief Minister Pinarayi Vijayan has addressed a letter to Prime Minister Narendra Modi, calling for his involvement to facilitate the release of the Government of India’s share of Viability Gap Funding (VGF) for the Vizhinjam International Seaport without the stipulation that the State must repay it later.
Vijayan stressed that such a stipulation could lead to a financial detriment of around Rs 10,000 to Rs 12,000 crore to the State treasury.
He pointed out that the ‘Maritime India Vision 2030’ and the ‘Maritime Amrit Kaal Vision 2047’ of the Ministry of Ports, Shipping and Waterways prioritize the establishment of Vizhinjam Port. The first phase of the Vizhinjam International Seaport project, developed in a Public-Private Partnership (PPP) format, has a projected cost of Rs 8,867 crore, with the State Government contributing Rs 5,554 crore.
“The Vizhinjam Seaport project is designed to receive Viability Gap Funding (VGF) under the Scheme for Financial Support to Public-Private Partnerships in Infrastructure by the Department of Economic Affairs, Ministry of Finance, Government of India. The Ministry has sanctioned Rs 817.80 crore as VGF for the project,” Vijayan stated.
He raised concerns regarding the condition enforced by the Centre that the VGF assistance provided must be repaid by the Kerala government in Net Present Value (NPV) terms through premium (revenue) sharing. “It is evident that if the payback is mandated, the assistance rendered would not be a capital grant but a loan,” he remarked.
“This contradicts the very purpose of the scheme. Although the state government has consistently appealed to the Union Ministry of Finance at various levels to lift this condition and release the VGF unconditionally, the appeal has not been favorably addressed,” Vijayan pointed out.
He elaborated on the original purpose of the VGF scheme. “The VGF scheme was instituted to promote Public-Private Partnerships (PPPs) in infrastructure projects that are economically justified but lack financial viability without additional support. Since its inception in 2005, the Ministry of Finance has approved VGF assistance amounting to Rs 23,665 crore for 238 projects valued at Rs 1.19 lakh crore. Never before has such repayment been demanded under the VGF scheme. The Vizhinjam International Seaport project would be an exception in the country where the Government of India has required repayment for the VGF assistance provided,” Vijayan stated.
He also underscored the financial ramifications. “As the Rs 817.80 crore allocated by the Centre is to be repaid on an NPV basis, this would equate to a repayment of Rs 10,000 to Rs 12,000 crore from the state treasury in actual terms, based on anticipated interest rates and revenue generated from the port during the repayment period,” he mentioned in the letter.
To ensure the project’s commercial viability, the State Government is matching the VGF provided by the Centre with an equal contribution of Rs 817.80 crore to the concessionaire. Furthermore, Kerala is investing Rs 4,777.80 crore into the project.
“The significant investment made by the State Government in a project of national importance, despite limited financial resources, deserves appropriate recognition. The rationale for premium sharing by the concessionaire (from the 15th year of port operations) in the concession agreement is not to recover the Rs 817.80 crore provided by the state government as VGF but to secure some inflows to the State Government, considering its substantial investment of Rs 4,777.80 crore and that revenues generated during the initial 15 years of port operation are relinquished by the State,” Vijayan clarified.
He appealed to the Prime Minister for intervention, stating, “Given the considerable investment made by the State (Rs 5,554 crore) and the benefits accruing to the nation as a whole, including foreign exchange savings, it is only fair that the decision mandating repayment of Rs 817.80 crore provided by the Government of India as VGF in NPV terms is revoked as soon as possible.”
