Thiruvananthapuram: Kerala Chief Minister Pinarayi Vijayan has urged Union Finance Minister Nirmala Sitharaman to release the Centre's share of Rs 817.80 crore in Viability Gap Funding (VGF) for the Vizhinjam seaport project without the condition of future repayment by the state.
In a letter to the FM, Vijayan expressed the condition imposed by the Empowered Committee constituted by the Department of Economic Affairs that the VGF amount should be repaid by Kerala in Net Present Value (NPV) terms by way of premium (revenue) sharing, would result in a huge loss of Rs 10,000 to 12,000 crore to the state exchequer, reported PTI.
"The state is investing resources to the tune of Rs 5,595 crore out of the total project outlay of Rs 8,867 crore. I am sure the Hon'ble Minister would appreciate that given the financial situation of a small state, like Kerala, with limited financial resources, this scale of investment involves tremendous sacrifice on the part of the state,” the CM said.
"In addition, as the repayment of Rs 817.80 crore is to be made on an 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 CM said.
He further said that the VGF was a financial support mechanism that was introduced to encourage Public-Private Partnerships (PPPs) in infrastructure projects that are economically justified but not financially viable without additional financial support.
The VGF is invariably provided as a grant, not a loan. Its defining elements are that "the payment to the concessionaire is non-repayable, it is a one-time grant, and it is over the construction period of the project. Thus, the condition that the VGF has to be repaid "defies the rationale" behind it, he added.
“The government of India and the government of Kerala, as the two project proponents, have jointly decided to give this grant to the concessionaire. But to further stipulate the condition that one of the project proponents, viz.- the government of India, will advance this money as a deferred 'loan' to the other project proponent, viz.- the state government, defies the rationale behind the VGF itself," he said in the letter.
Vijayan added that such a condition of VGF repayment was not imposed on the Outer Harbor project of VOC Tuticorin Port, which is "structured on similar lines as the Vizhinjam International Seaport".
"In the light of the facts outlined above, I request you to kindly accord the same treatment for Vizhinjam International Seaport as has been done for Tuticorin Port referred to above," he said.
Subsequently, Kerala Ports Minister V N Vasavan raised the same issues at a press conference held in Kottayam, reported PTI. Vasavan said that of the Rs 8,867 crore project cost, Rs 5,595 crore was the state's share and Rs 2,454 crore that of Adani.
He told reporters that the government has already spent Rs 2,159.39 crore on the state's share of Rs 5,595 crore, but the Centre has yet to provide its share of Rs 817.80 crore. He alleged that the Centre was imposing an additional financial burden on the state by requiring repayment of the VGF. The minister said that the country and the central government would benefit the most from the seaport.
In his letter, the CM also said that ports in India account for a lion's share of the Customs duties collected in the country. Even on a modest assessment, "if Vizhinjam seaport were to account for Rs 10,000 crore annually by way of Customs duties, the government of India would derive additional revenue of Rs 6,000 crore every year."
"I seek your kind intervention for the release of the central government's share in the VGF for the Vizhinjam International Seaport without imposing the condition that the state must repay it later and help avoid the huge financial loss of approximately Rs 10,000 to 12,000 crore in nominal terms to the state exchequer," the CM said in his letter to Sitharaman.