In the Viability Gap Funding (VGF) for the Vizhinjam seaport here, Kerala Chief Minister Pinarayi Vijayan has urged Union Finance Minister Nirmala Sitharaman to release the Center’s share of Rs 817.80 crore without requiring the state to reimburse it later. In a letter to the FM, Vijayan claimed that the Empowered Committee, which was established by the Department of Economic Affairs, had imposed a requirement that Kerala repay the VGF amount in Net Present Value (NPV) terms through premium (revenue) sharing. This requirement would cause the state exchequer to suffer a significant loss of between Rs 10,000 and Rs 12,000 crore.
Out of the Rs 8,867 crore project budget, the state is contributing Rs 5,595 crore in resources. This kind of investment requires a great deal of sacrifice on the part of the state, especially considering the financial situation of a small state like Kerala with limited resources. “In addition, as the repayment of Rs 817.80 crore is to be made on NPV basis, this would involve a further loss of Rs 10,000 to 12,000 crore to the state exchequer in actual terms, computed on projected interest rates and revenue realisation from the port over the period of repayment,” the chief minister stated.
He added that Public-Private Partnerships (PPPs) in economically justified infrastructure projects that are not financially feasible without additional funding are encouraged by the VGF, a financial support mechanism. The CM stated that “the payment to the concessionaire is non-repayable, it is a one-time grant, and that it is over the construction period of the project” are the characteristics that define the VGF, which is always given as a grant rather than a loan. He continued by saying that the need that the VGF be paid back “defies the rationale” behind it.
