The Centre has outrightly rejected the Kerala Government's demand to release its share of the Viability Gap Funding (VGF) for the Vizhinjam seaport without conditions, making it clear that it is not comparable to the Outer Harbour Container project at Tuticorin port.

The union government's response came weeks after Kerala Chief Minister Pinarayi Vijayan had urged Finance Minister Nirmala Sitharaman to release the VGF share of Rs 817.80 crore for the Vizhinjam seaport here without imposing the condition that the state has to repay it later.

In a recent reply letter sent to Chief Minister Pinarayi Vijayan, Sitharaman said that though the Vizhinjam International Seaport is a state sector project, the Centre has agreed to provide the VGF of Rs.817.80 crore to facilitate commercial viability.

The state government would also be providing the VGF of almost equal amount, she noted in the letter. After the port is set up and carries out its commercial operations for a period of 15 years, the concession agreement provides for premium payment (revenue sharing) by the concessionaire.

As per the approved financing arrangement of the project, the state government has to share with the Government of India, 20 per cent of the premium that the state government will receive from the concessionaire from the year 2034 onwards, she said.

"The rest 80 per cent of the premium shall be retained by the State Government. As such, this is a fair sharing of the premium," Sitharaman said in the letter dated on November 30.

The union finance minister said that similar requests received from the State Government earlier were considered by the Empowered Committee, and were not found acceptable.

She also said that the project is not comparable with the Outer Harbour Container project at Tuticorin port. The expenditure on the Tuticorin project as well as revenues from the project belong to the VOC Port Authority, an autonomous body under the administrative control of the government of India, Sitharaman added.

Vijayan, in a letter to the union FM in October, said 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.

The CM had further said 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".

Meanwhile, the Kerala Ports Minister V N Vasavan, while speaking to reporters, on Monday reiterated the state's demand for the Centre to release its VGF share for the Vizhinjam seaport.

Pointing out the case of Tuticorin port, he accused the Centre of showing a discriminatory approach towards the state in terms of VGF.

He claimed that the empowered committee of the Centre had earlier recommended giving VGF to the state but they changed their stance later saying that it could be considered as a loan amount only. The state may have to repay a huge amount in this regard in future, he added.

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