Thiruvananthapuram, Dec 14 Kerala Chief Minister Pinarayi Vijayan has written to Prime Minister Narendra Modi, urging his intervention to release the Government of India’s share of Viability Gap Funding (VGF) for the Vizhinjam International Seaport without imposing the condition that the State must repay it later.
Vijayan emphasized that such a condition could result in a financial loss of approximately Rs 10,000 to Rs 12,000 crore to the State exchequer.
He noted that the ‘Maritime India Vision 2030’ and the ‘Maritime Amrit Kaal Vision 2047’ of the Ministry of Ports, Shipping and Waterways prioritise the establishment of Vizhinjam Port. Phase-1 of the Vizhinjam International Seaport project, developed under a PPP format, has an estimated cost of Rs 8,867 crore, with the State Government contributing Rs 5,554 crore.
“The Vizhinjam Seaport project is structured to avail 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 approved Rs 817.80 crore as VGF for the project,” Vijayan stated.
He expressed concern over the condition imposed by the Centre that the VGF assistance disbursed by it should be repaid by the Kerala government in Net Present Value (NPV) terms through premium (revenue) sharing. “Needless to say, if the payback is insisted upon, the assistance provided would not be a capital grant but a loan,” he remarked.
“This is contrary to the very intent of the scheme. Though the state government has repeatedly requested the Union Ministry of Finance at various levels to revoke the above condition and release the VGF unconditionally, the request has not been considered favourably,” Vijayan pointed out.
He further explained the original intent of the VGF scheme. “The VGF scheme, as a financial support mechanism, was introduced to encourage Public-Private Partnerships (PPPs) in infrastructure projects that are economically justified but not financially viable without additional financial support. Since its introduction in 2005, the Ministry of Finance has approved VGF assistance worth Rs 23,665 crore for 238 projects valued at Rs 1.19 lakh crore. Never in the past has such payback been demanded under the VGF scheme. Vizhinjam International Seaport project would be the only exception in the country where the Government of India has demanded payback for the VGF assistance provided,” Vijayan stated.
He also highlighted the financial implications. “As the Rs 817.80 crore provided by the Centre is to be repaid on an NPV basis, this would result in a repayment of Rs 10,000 to Rs 12,000 crore from the state exchequer in actual terms, based on projected interest rates and revenue realisation from the port over the repayment period,” he said in the letter.
To ensure the commercial viability of the project, the State Government is matching the VGF provided by the Centre with an equal amount of Rs 817.80 crore to the concessionaire. Additionally, Kerala is investing Rs 4,777.80 crore in the project.
“The efforts taken by the State Government in investing a substantial amount in a project of national importance, despite its limited financial resources, should be given due consideration. The rationale of 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 ensure some inflows to the State Government, considering its huge investment of Rs 4,777.80 crore and that revenues arising from the first 15 years of port operation are foregone by the State,” Vijayan explained.
He urged the Prime Minister to intervene, stating, “Considering the major investment made by the State (Rs 5,554 crore) and the returns accruing to the nation as a whole, including savings on foreign exchange, it is only just and fair that the decision requiring repayment of Rs 817.80 crore provided by the Government of India as VGF in NPV terms is withdrawn at the earliest.”
Disclaimer: This post has been auto-published from an agency feed without any modifications to the text and has not been reviewed by an editor