The Union government has reaffirmed its stance that Kerala must repay the Rs 817.80 crore provided as Viability Gap Funding (VGF) for the Vizhinjam port project. In a letter to the Chief Minister’s office, the Union Ministry of Finance rejected Kerala’s request to exempt the VGF from being treated as a repayable loan. The state had argued that such repayment would impose a severe financial strain, but the Centre maintained that the assistance must be reimbursed, particularly as the port is expected to become profitable in the future.
Kerala has strongly opposed this decision, highlighting disparities in treatment compared to other ports like Thoothukudi, which received similar funding without repayment conditions. The state estimates that repaying Rs 817 crore with interest could amount to approximately Rs 12,000 crore over time, a significant burden given the long gestation period before the port generates revenue. Kerala also pointed out that the Centre has yet to release funds for the project, even though the state has already spent Rs 2,159 crore out of its allocated share of Rs 5,595 crore.
The Centre justifies its decision by citing that this is the first time VGF has been granted to a public-private partnership (PPP) port project. The agreement with Adani Ports includes a revenue-sharing model that will only take effect 15 years after the port becomes operational. The Centre’s insistence on repayment, despite Kerala’s substantial 20% investment in the project, has drawn criticism from the state, which accuses the Union government of creating financial barriers. This issue is likely to escalate into a significant political debate.
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