VGF Issue of Vizhinjam Port

December 17, 2024

The Government of India has declined Kerala’s request to draw a parallel between the Tuticorin port and the Vizhinjam port regarding the conditions for providing the Central share of Viability Gap Funding (VGF).

Viability Gap Funding (VGF) Scheme

VGF is a financial support scheme provided by the government to infrastructure projects that are economically sound but financially unviable.
The Viability Gap Funding (VGF) Scheme was first started in 2004.
It is often used in Public-Private Partnership (PPP) models to attract private investment.
The purpose of VGF is to bridge the gap between the project cost and the expected revenue and to encourage private sector participation in infrastructure development.
The government provides a grant, typically up to 20-40% of the total project cost, as part of the VGF scheme.
For PPP projects, the agreement may include repayment or revenue-sharing clauses.

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About Tuticorin Port (Outer Harbour Container Terminal)

Tuticorin Port (Outer Harbour Container Terminal) is located in Thoothukudi, Tamil Nadu, India.
It is a major port on the southern coast of India, strategically located on East-West international shipping routes.
The port is undergoing significant expansion with the development of the Outer Harbour Container Terminal.
- This expansion aims to increase the port’s capacity to handle larger vessels and more cargo.
Authority: Developed and managed by V.O. Chidambaranar (VOC) Port Authority, an autonomous body under the Government of India.
Funding Model: No repayment condition for VGF since the project is a Central initiative.
- Revenue and expenditure are directly managed by the VOC Port Authority.
Operational Model: Not subject to any revenue-sharing agreements.

VGF

Vizhinjam Port (International Seaport)

Location: Vizhinjam, Thiruvananthapuram district, Kerala, India
Authority: Adani Vizhinjam Private Port Limited (AVPPL) under a public-private partnership (PPP) model
Funding: State government support through a Viability Gap Funding (VGF) scheme
Significance: Aims to be a major international seaport, enhancing India’s maritime trade, boosting Kerala’s economy, and creating employment opportunities.

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