In a first, Vizhinjam international port project to get viability gap funding

The Centre has cleared viability gap funding (VGF) for the proposed and long-delayed international port project and container trans-shipment terminal project at Vizhinjam here.

The ₹4,050-crore project is proposed to be set up through the design, build, finance, operate, and transfer mode.

This is the first time that the one-time grant of this type has been accorded to a port project in the country.

Announcing this, a Kerala government spokesman said a communication to this effect has been received. Finance Minister Arun Jaitley had signed the proposal on Tuesday last. This was done on the basis of a recommendation made by an empowered committee headed by finance secretary Rajiv Mehrishi.

The VGF component for the project is estimated to be a little over ₹800 crore. This would raise the viability of the multi-thousand-crore project, the biggest infrastructure project yet in the State.

The Centre makes available VGF facility amounting to up to 20 per cent of the capital costs for supporting public-private-partnership projects that ‘are economically viable but run short of financial viability’.

Lack of financial viability usually arises from long gestation periods and the inability to increase user charges to commercial levels. The amount of VGF will be equivalent to the lowest bid for capital subsidy, but subject to a maximum of 20 per cent of the total project cost.

This amounts to ₹800 crore as the Centre’s share. The State government can decide to put up an equivalent share of its own.

The project is awarded to the bidder quoting either the lowest amount for the State government’s share of VGF or the highest premium for the project. The winner of the bid would put the port superstructure and operate the proposed deepwater container trans-shipment terminal. The project had earlier been cleared for VGF but some of the provisions were not in favour of the project and the interests of the State.

It requested the empowered committee under the Union Finance Ministry for a relook of the matter.

The approval has come right in time for five bidders looking at the February 20-deadline for submitting the final bid to build the port superstructure and operating the project.

The five major port-operating companies which have responded to the global tender floated by Vizhinjam International Seaport Ltd are Adani Ports and Special Economic Zone; Essar Ports; Gammon Infrastructure Projects; a consortium of Srei Infrastructure Finance and Obrascon Huarte Lain SA; and a joint venture of Concast Infratech and Hyundai Engineering and Construction.

Vizhinjam will be developed as a container trans-shipment terminal with a capacity to load six lakh twenty-foot equivalent units (TEUs) a year initially, which can be scaled up to one million TEUs.

The port project will have a contract period of 40 years which can be extended by another 20 years.