The proposed Vizhinjam deepwater port and international transhipment terminal near here has become the first to be granted viability gap funding by the Centre.

A decision to this effect was taken at a meeting of an empowered panel under the Union Finance Ministry on Wednesday evening.

One-time grant

This would need to get final approval from the Union Finance Minister, an announcement to which is expected to be made soon.

VGF is a one-time grant provided to support infrastructure projects that are economically justified but fall short of financial viability.

Financial viability

The 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 will amount to ₹800 crore for the Vizhinjam project as the Centre's share.

The State Government of Kerala can decide to put up an equivalent share of its own.

State govt share

The project will be awarded to the bidder who quotes either the lowest amount for the State Government's share of VGF or the highest premium for the project.

The five bidders are Gammon Infrastructure Projects, Hyundai-Concast consortium, Essar Ports, Adani Ports, and Srei-OHL, a consortium of Srei Infra and Spanish construction firm Obras-con Huarte Lain.

The winner of the bid would put the port superstructure and operate the proposed deepwater container transshipment terminal.

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

The recommendation to grant VGF is expected to boost investor confidence in the project since it signals the involvement of the Government of India.

Promoters Vizhinjam International Seaport Ltd hopes to complete the tendering process by December.

Related Topics