Centre interprets grant for Vizhinajam as loan, wants Kerala to repay. Bizarre, says CM

Thiruvananthapuram: Chief Minister Pinarayi Vijayan on Monday termed as "bizarre" the Centre's demand that its share of viability gap funding (VGF) be repaid with interest and held this new stipulation as yet another demonstration of the BJP-led Centre's indifference towards Kerala.

"This is a complete deviation from the VGF policy that has been followed in the country till now," the CM told reporters on Monday. "The VGF is a one-time grant. Now, the Centre wants this to be considered as a loan. Never before has the centre sought repayment from any project for which VGF was granted," he added. For instance, there is no repayment clause for Tuticorin Port, which was given a VGF grant.

He said both the Centre and the state government had jointly agreed to provide VGF for the Vizhinjam project. The VGF was divided equally: Rs 817.80 crore by the Centre and Rs 817.20 crore by Kerala. Together (Rs 1,635 crore), the VGF makes up 40 per cent of the Vizhinjam project cost.

The Centre's demand, articulated in Union Finance Minister Nirmala Sitharaman's letter to Chief Minister Pinarayi Vijayan, is that Kerala should repay 20 per cent of the profits from the operations of the transhipment terminal.

"If we give in, and considering the interest, Kerala will end up paying Rs 12,000 crore to the centre," the CM said. "The VGF grant has now been interpreted as a loan and the entire burden of repayment is foisted on the state. This is a repudiation of the very concept of VGF," he added.

VGF is capital support to PPP (public private partnership) projects that would otherwise be financially unviable. Central government documents back the CM's claim. The revamped VGF guidelines describe it as a "one-time grant". However, in the union Finance Minister's letter, she states that the VGF is a loan. Interestingly, the VGF Guidelines put out by the Department of Economic Affairs speak of "recovery" only in the case of "terminated projects".

Further, the CM said that the Centre's VGF agreement is with the Adani Group and the lending bank. "This being the case, it is bizarre that the Centre is insisting on a repayment contract with the state," the CM said.

Moreover, the CM said that the Kerala government was spending nearly Rs 5,000 crore for the construction of the port and allied activities. "That is why the state receives a larger share of the profits from operations," he said.