Kerala CM writes to PM Modi requesting withdrawal of Centre’s decision on Vizhinjam port VGF

Kerala CM urges PM Modi to provide Vizhinjam Seaport project funding without repayment conditions, citing unfair treatment.

After the Centre rejected the Kerala government's plea to reconsider its decision requiring the state to repay the Viability Gap Fund (VGF) for the Vizhinjam Seaport project in instalments, Chief Minister Pinarayi Vijayan on Saturday (December 14, 2024) wrote to Prime Minister Narendra Modi, saying the fund be given without insistence on repayment by the state.

In his open letter, the CM alleged that the Vizhinjam International Seaport project would be the only case in the country where the Government of India has demanded repayment of the Viability Gap Funding (VGF) assistance provided.

The Vizhinjam Seaport project is structured to avail Viability Gap Funding (VGF) under the Scheme for Financial Support to Public Private Partnerships (PPP) in infrastructure by the Department of Economic Affairs (DEA), Union Ministry of Finance. The Ministry has approved an amount of Rs. 817.80 crore as VGF for the project.

However, to avail of the VGF, the Union Ministry of Finance imposed the condition that the VGF assistance disbursed by the Government of India be repaid by the Kerala government in Net Present Value (NPV) terms by way of premium (revenue) sharing.

"Needless to say, if the payback is insisted by the union government, the assistance provided would not be a capital grant but would be a loan. This clearly is contrary to the very intent of the scheme," the letter said.

"Though the state government has repeatedly requested the Union Ministry of Finance at various levels to revoke the above condition and release the VGF recommended to the state unconditionally, the request of the state has not been considered favourably," the letter added.

As the ₹817.80 crore provided by the central government is to be repaid on Net Present Value (NPV) basis, this would result in the repayment of ₹10,000 to 12,000 crore from the state exchequer in actual terms, computed on projected interest rates and revenue realisation from the port over the period of repayment, CM stated.