T’PURAM/KOTTAYAM : Chief Minister Pinarayi Vijayan has written to Union Finance Minister Nirmala Sitharaman, urging her intervention to release the Centre’s share of the viability gap funding (VGF) for the Vizhinjam International Port without the condition that the state must repay it later.
The state government opposes the Centre’s decision to impose a repayment obligation on its share of `817.8 crore. Earlier, both parties had agreed to pay `1,635 crore (40% of the project cost) to Adani Vizhinjam Port Pvt Ltd (AVPPL), the project’s concessionaire. However, the new stipulation mandates that the VGF disbursed by the Centre must be repaid by the government of Kerala in net present value (NPV) terms through revenue sharing.
That could result in an additional loss of `10,000 to `12,000 crore to the state’s exchequer, based on projected interest rates and revenue from the port during the repayment period, the CM stated in the letter.
“The viability gap funding was introduced in India to support public-private partnerships (PPPs) in infrastructure projects that are economically viable but not financially sustainable without additional support. The primary goals of VGF are to encourage private sector participation in infrastructure, promote development, and reduce the burden on government resources. VGF is typically provided as a grant, not a loan,” the CM said.
He also pointed out that the Centre has not imposed similar conditions on other projects, such as the Outer Harbour project at VOC Tuticorin Port in Tamil Nadu. The CM reminded that the Centre stands to gain financially from the Vizhinjam port through customs duties. For every rupee collected in customs duty, the Government of India retains approximately 60 paise, while the state of Kerala receives less than 3 paise as its share of central taxes, he stated.
‘Unfair and discriminatory’
Expressing deep concern over the Centre’s demand that the state government repay VGF for the Vizhinjam port, Ports Minister V N Vasavan termed the requirement unfair and discriminatory.
The condition that VGF should be repaid in terms of net present value (NPV) will place a significant financial burden on the state, he told reporters in Kottayam on Friday.
“This means that while the initial amount paid is Rs 817.8 crore, the total repayment could amount to around Rs 10,000-12,000 crore. This calculation takes into consideration fluctuations in the interest rates over the repayment period and the revenue generated by the port,” he said.
The minister said the amount paid to the concessionaire is not to be reimbursed, as per the norms.
“VGF is a joint initiative between the state and the Union government, with the Centre contributing `817.8 crore and the state `817.2 crore. The state will directly pay its share to the Adani port company. However, there is a clause that stipulates that the state government repay 20%of the of the Centre’s contribution once the port begins generating dividends,” he said.
Vasavan alleged that the repayment structure is illogical and goes against the purpose of VGF.