Vizhinjam Port: Centre Gives Nod For Viability Gap Funding To Transhipment Hub Project

The Vizhinjam International Deepwater Multipurpose Seaport owned by the Adani Group has received final approval from the central government to receive Viability Gap Funding (VGF). 

The VGF is a one-time grant provided by the central government to promote infrastructure Public-Private-Partnership (PPP) projects that are economically justified but lack financial sustainability.

“The government of India has finally sanctioned the VGF,” said Subrata Tripathy, chief executive, Ports, Adani Ports and Special Economic Zone Ltd (APSEZ).

"We are expecting the VGF to come in so that the project gets going”, reports Economic Times.

The centre (Rs 818 crore) and the Kerala government (Rs 817 crore) will split the viability grant funding of Rs 1,635 crore for the Vizhinjam project, making it the first and only port project to obtain such a grant. 

The first Rs 1,227 crore will be provided during the construction phase, with the remainder provided during the 40-year operation period, which can be extended by another 20 years.

Vizhinjam is being developed as a container transhipment port with a Rs 5,552 crore investment. From the 16th year of operation, the Kerala government will collect a premium/revenue share from the private operator.

The VGF was used to award the contract to APSEZ, which bid the lowest grant of Rs 1,635 crore in a 2015 auction.

Significance Of Vizhinjam Port

The deep-water, multipurpose, international seaport and container transhipment terminal at Vizhinjam is being constructed by Adani Vizhinjam Ports Pvt Ltd (AVPPL). It is expected to boost India's maritime ambitions significantly.

The port project was signed during the tenure of the Congress-led United Democratic Front (UDF) government led by former chief minister Oommen Chandy.

The Adani Group and the Kerala government signed a Rs 7,525 crore deal, but the project hit several roadblocks and controversies.

Once complete, Vizhinjam will emerge as a significant competition to the transhipment ports of Colombo, Singapore and Dubai as it is the only transhipment hub in the Indian subcontinent, closest to the international shipping routes, and is centrally located on the Indian coastline.

It has a natural draft of 20-24 m and minimal littoral drift.

The port will also offer infrastructure to handle Megamax containerships. Its capacity in Phase 1 is 1 million Twenty Equipment Units (TEUs) — in subsequent phases, another 6.2 million TEUs will be added.