The Union government has rejected Kerala’s request to waive the repayment of the viability gap funding (VGF) provided for the Vizhinjam International Seaport. In October, Kerala Chief Minister Pinarayi Vijayan had written to Union Finance Minister Nirmala Sitharaman, urging that the VGF for the ambitious seaport project be waived.
In his letter, the CM emphasised, "Viability gap funding is invariably provided as a grant, not a loan. Thus, the defining elements of any VGF are that the payment to the concessionaire is non-repayable, it is a one-time grant, and it is given over the construction period of the project."
The Vizhinjam Port was the first port project in the country to receive approval for VGF under the Scheme for Financial Support to Public-Private Partnerships in Infrastructure. The Department of Economic Affairs' Empowered Committee (under the Ministry of Finance) had recommended final approval for the project in its 41st meeting, endorsing a sum of Rs 817.80 crore under the scheme.
Now in its final commissioning stages, the Vizhinjam International Seaport operated by Adani is set to serve as a deep-water container transshipment hub. During its trial phase, the port received 68 ships and handled 1.49 lakh TEUs.
In a response in Parliament, the Union government clarified that, as per the approved financing arrangements for the Vizhinjam PPP project, the Government of Kerala is required to share 20% of the premium it receives from the concessionaire with the Government of India (GoI) starting in 2034. The remaining 80% of the premium will be retained by the state government.
The response also noted that the Kerala government had previously raised requests to waive this premium-sharing obligation in June 2022 and again in July 2024, both of which were rejected. The latest request in October 2024 was turned down, citing that "premium sharing was one of the conditions of the in-principle as well as the final approval for the VGF support."