VGF Issue of Vizhinjam Port

17 Dec 2024

VGF Issue of Vizhinjam Port

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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