Kerala has accepted the central government’s Rs 8.178 billion Viability Gap Funding (VGF) for the Vizhinjam International Port, agreeing to repay the amount under the Net Present Value (NPV) model. The decision was taken during a state cabinet meeting chaired by Chief Minister Vijayan during a state cabinet meeting chaired by Chief Minister Pinarayi Vijayan.
The Vizhinjam International Seaport is a strategically significant deepwater port designed to handle large container ships and enhance India’s maritime trade competitiveness. The first phase of the project is nearing completion, and the acceptance of central funds ensures the state can move forward with infrastructure development, port expansion, and connectivity.
In a significant development, the Kerala government has agreed to accept ₹817.80 crore from the central government as Viability Gap Funding (VGF) for the Vizhinjam International Seaport project. This decision was made Adani Ports under a public-private partnership model The project is being developed in collaboration with.
Background and Funding Dispute
The Vizhinjam International Seaport, located near Thiruvananthapuram, is a strategically important deepwater port designed to accommodate large container ships and bolster India’s maritime trade competitiveness accept the funds under the stipulated terms to ensure the project’s continuation Despite these efforts, the central government upheld its stance, leading Kerala.
Initially, the Kerala government sought the VGF as a grant without repayment obligations, drawing parallels to the Outer Harbour Container project at Tuticorin Port, which reportedly did not have similar repayment conditions. However, the central government maintained that the two projects had different financial structures and insisted on repayment under the Net Present Value (NPV) model.
In October 2024, Chief Minister Vijayan appealed to Finance Minister Nirmala ₹4,600 crore, which includes Sitharaman to reconsider the repayment condition, arguing that it would impose a financial burden of ₹10,000 to ₹12,000 crore on the state and ₹1,482.92 crore allocated for a railway line to facilitate cargo movement.
Financial Implications and Project Details
The accepted VGF of ₹817.80 crore will be disbursed to the concessionaire, Adani The first phase of the Vizhinjam port project has an estimated cost of ₹7,700 crore. The Kerala government is contributing approximately ₹1,350 crore for breakwater construction Ports, and is to be repaid by the state once the port begins generating profits.
While the state government viewed this funding as a loan, the central government clarified that, although it requires repayment, it does not carry interest, distinguishing it from traditional loans. The successful completion of the Vizhinjam International Seaport is anticipated to position Kerala as a key player in international maritime trade, fostering regional development and economic growth.
Kerala has accepted ₹817.8 crore in central Viability Gap Funding for the Vizhinjam Port project, ensuring progress despite repayment obligations, enhancing maritime trade, and boosting Kerala’s economic and logistical capabilities.
Significance and Future Outlook
Accepting the VGF under the central government’s terms ensures the progression of the Vizhinjam port project, which is poised to significantly enhance Kerala’s economy by generating employment and attracting global shipping companies. The port is expected to reduce India’s reliance on foreign like Colombo and Singapore, thereby improving logistics.
Despite the financial obligations associated with the VGF repayment, the Kerala government’s decision reflects a commitment to advancing critical infrastructure projects that promise long-term economic benefits efficiency and reducing turnaround times for cargo movement.
The Kerala government has accepted ₹817.80 crore in Viability Gap Funding (VGF) from the central government for the Vizhinjam International Seaport project. The decision was taken during a state cabinet meeting led by Chief Minister Pinarayi Vijayan after prolonged negotiations over the funding structure.
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