Kerala’s Chief Minister, Pinarayi Vijayan, has appealed to Prime Minister Narendra Modi to reconsider a directive from the Finance Ministry that mandates the state to repay the Viability Gap Funding (VGF) for the Vizhinjam International Seaport Project.
In his correspondence, the Chief Minister expressed that the requirement to repay ₹817.80 crore given by the Union Government as VGF on a Net Present Value (NPV) basis could lead to a total repayment of approximately ₹10,000 to ₹12,000 crore from the state’s budget, based on projected interest rates and anticipated revenue from the port over time.
Vijayan highlighted that the government’s position contradicts the standard guidelines for VGF, which define it as a non-repayable capital grant rather than a loan. He emphasized, “If repayment is insisted upon by the government, the assistance rendered will not be classified as a capital grant but rather as a loan. This contradicts the fundamental purpose of the scheme.”
He further pointed out the substantial investment made by the state, amounting to ₹5,554 crore, and argued that the returns—particularly in terms of foreign exchange savings—benefit the nation as a whole. Therefore, it is equitable and reasonable for the Union Government to withdraw the repayment requirement for the ₹817.80 crore provided as VGF on an NPV basis.
The Chief Minister noted that the initial phase of the port, which began trial operations in July, has been successful, with commercial operations launching on December 3. Once fully developed by 2028, Vizhinjam Port is expected to play a crucial role in enhancing the country’s logistics supply chain. This development aligns with the government’s aim to reduce logistics costs from the current 14% to the global benchmark of 8%, as outlined in the Prime Minister’s Gati Shakti scheme.
Despite the state government’s numerous appeals to the Finance Ministry at various levels to revisit the repayment conditions, these requests have not been favorably acknowledged, according to the Chief Minister.
