Centre gives final nod to VGF for Vizhinjam port project

07 Nov 2022 CW Team

The Centre has granted final approval for extending viability gap funding (VGF) of Rs 8.18 billion to the Vizhinjam International Deepwater Multipurpose Seaport being built by the Adani Group, even as protests from local fishermen and other delays continue to dog the project.

The port is meant to cut India’s dependence on Colombo to send and receive container cargo. The Vizhinjam project is entitled to receive a viability grant funding of Rs 16.35 billion, to be shared by the Centre (Rs 8.18 billion) and the Kerala government (Rs 8.17 billion), making it the first and only port project to be offered such a grant. Of this, Rs 1,227 crore will be given during the construction phase and the balance during the operation period spanning 40 years and extendable by another 20 years.

The VGF was the basis on which the bid was awarded to Adani Ports and Special Economic Zone Ltd (APSEZ), which quoted the least grant of Rs 16.35 billion in an auction in 2015.

“The government of India has finally sanctioned the VGF,” said Subrata Tripathy, chief executive, ports, APSEZ. “We are expecting the VGF to come in so that the project gets going.”

VGF is a one-time grant given by the central government for supporting public-private-partnership (PPP) projects in infrastructure that are economically justified but fall short of financial viability.

Vizhinjam is being developed as a container transhipment port with an investment of Rs 55.52 billion. The Kerala government will collect a premium/revenue share from the private operator from the 16th year of operations.

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