Release viability gap funding to Vizhinjam port as grant, not loan, Kerala Chief Minister requests Centre

Vizhinjam is the first port project in the country to receive in-principle approval for VGF on February 3, 2015, under the Scheme for Financial Support to Public Private Partnerships in Infrastructure, the Chief Minister recalled in a letter to Sitharaman on Friday. The Empowered Committee constituted by Department of Economic Affairs had recommended the project for final approval under the scheme at its 41st meeting for an amount of ₹817.80 crore.

The Chief Minister said, the Empowered Committee had laid down a condition that VGF disbursed by the Centre to the Concessionaire should be repaid by the State government in Net Present Value (NPV) terms by way of premium (revenue) sharing. But VGF, he pointed out, was introduced to encourage Public Private Partnership (PPPs) in infrastructure projects that are economically justified but not financially viable without additional financial support.

Vijayan cited an instance in which Department of Economic Affairs had accorded as recently as in November, 2023, in-principle approval for Outer Harbour project of VO Chidambaranar Port in Tamil Nadu, which is structured on similar lines as the VISL. “However, the condition that VGF must be repaid is not imposed here. The Draft Concession Agreement (DCA) looks at revenue in this case from the 11th year onwards with a cap of 35 per cent.”

Given the fact that ports account for a lion share of Customs duties collected (estimated in the Union Budget for the current year at ₹2.38 lakh crore), the VISL, which is to be commissioned in December, will soon contribute very significantly to this, the Chief Minister claimed. Out of every one rupee collected, the share accruing to the Centre is approximately 60 paise while Kerala gets to retain less than 3 paise to a rupee as its share of central taxes, he added.

“Even on a very modest assessment, if VISL were to account for ₹10,000 crore annually by way of Customs Duties, the Centre would derive additional revenue of ₹6,000 crore every year. Furthermore, the direct and indirect benefits to the nation and the savings of foreign exchange that results from establishing such a port would be very substantial,” Vijayan pointed out.