Kerala inks Rs 817.80 cr loan MoU with Centre for Adani group-operated Vizhinjam Port

The union government, a bank consortium and Adani Ports Pvt Ltd, which manages the Vizhinjam deep-sea port, on Wednesday inked a tripartite Memorandum of Understanding (MoU) for providing Viability Gap Funding (VGF) of Rs 817.80 crore to the project. Besides that, the Centre and the Kerala government signed an MoU according to which the state will share 20 per cent of the revenue it gets from the port with the union government.

The deep-water port has been developed by Adani Ports and Special Economic Zone Ltd (APSEZ), India's largest port developer and part of the Adani Group, under a public-private partnership model at an estimated cost of Rs 8,867 crore.

Speaking on the occasion, state Minister for Ports, V N Vasavan said that the Kerala government has decided to accept the VGF as a loan from the Union government.

He said that the state agreed to accept it as a loan after several pleas to the Centre to provide it as a grant did not yield a result.

"Till now, the Union government had provided VGF as a grant, like it had given to the Tuticorin Port. Our Chief Minister had personally written to the Prime Minister requesting him to provide the amount as a grant. But we have not received any positive reply and in order to avoid further delays, we have decided to take it as a loan," Vasavan said.

V N Vasavan said the Vizhinjam International Seaport Ltd (VISL) is the biggest development dream of the state and the government did not want any delay in completion of the project.

The minister said the first phase of the project is already completed and the commissioning will be done based on the dates available with the Prime Minister.

"The Kerala government is already in talks with the PMO and they have said that the PM's date will be awarded sooner," Vasavan said.

He said the VISL has already become the number one port in the country and is also now considered one of the best in the entire world.

So far, more than 250 cargo vessels have docked at the VISL, handling over 6 lakh TEUs (Twenty-foot Equivalent Units), the minister said.

He further said that the works for completing the rail and road connectivity to the port are being done on a war-footing and will be completed by 2028.

A cabinet meeting chaired by Kerala Chief Minister Pinarayi Vijayan on last Thursday, had decided to accept the central government's share of Rs 817.80 crore as VGF for the port project.

According to a statement from the Chief Minister's Office, issued post the Cabinet meeting, the central government has set a condition that the state must repay the amount under the Net Present Value (NPV) model.

Earlier, the Kerala government had requested the Centre to release the VGF share without conditions.

However, the Union government rejected this request, stating that the Vizhinjam project could not be compared to the Outer Harbour Container project at Tuticorin Port.

Vijayan had then written to Finance Minister Nirmala Sitharaman in October last year, urging her to release the funds without the repayment condition.

He had argued that the condition imposed by the Department of Economic Affairs' Empowered Committee would result in a financial burden of Rs 10,000 to Rs 12, 000 crore for the state.

The CM had also contended that a similar repayment condition was not applied to the Outer Harbour project at Tuticorin Port, which follows a similar financial structure to the Vizhinjam Seaport.

The port received the commercial commissioning certificate on December 4 last year following the successful completion of its trial run.