Vizhinjam Port Revenue Sharing War: Modi Government Claims 'Fair Share' While LDF Alleges 'Discrimination' Against Kerala

The arguments between the Union government and the Kerala government led by Pinarayi Vijayan over the revenue sharing from Adani's Vizhinjam International Seaport (VIS) continue.

In his correspondence with Union Finance Minister Nirmala Sitharaman, Vijayan contended that the Central government had disregarded financial logic by categorising the Rs 817.80 crore, which was provided as viability gap funding (VGF) for the Vizhinjam project to make it economically viable, as a loan and an investment.

The government of Kerala highlighted that the Central government had provided a substantial VGF for the Kochi Metro project without any stipulation that the state must repay the grant to the Federal Treasury or share the profits from the project.

The paragraph also highlighted that the Union government had allocated a Rs 1,411-crore VGF grant to the Thoothukudi Outer Harbour Project in Tamil Nadu, without any stipulation for repayment or revenue sharing.

The government of Kerala has argued that the late introduction of the VGF repayment and revenue sharing condition by the Centre is biased and burdensome on the state's public treasury, The Hindu reported.

The report highlighted that the Centre amassed Rs 50 crore in Goods and Service Tax (GST) from the Vizhinjam port even before its commercial operations were initiated.

To date, the international transhipment port has welcomed 70 large container ships. The Kerala government has stated that, with the increased operations at Vizhinjam port, the Centre could potentially generate an annual GST of up to Rs 12,000 crore.

In the meantime, the Centre has categorically rejected the arguments put forth by the Kerala government. In her correspondence to Vijayan on 30 November, Sitharaman stated that Kerala is expected to receive 80 per cent of the premium paid by the concessionaire, Adani Ports.

The concessionaire is set to remit 20 per cent of the premium to the Indian Government, according to the agreed financial plan. "It’s a fair sharing of the premium," Sitharaman stated in her correspondence.

According to Sitharaman, the projects of Vizhinjam port and Thoothukudi Outer Harbour are conceptually distinct from each other.

The Thoothukudi project was overseen by an independent agency under the purview of the Central government. The empowered committee of the Union Finance Ministry thoroughly scrutinized the arguments presented by the Kerala government and deemed them to be "unacceptable".

In the meantime, the Left Democratic Front (LDF) in power has underscored the Centre's position as the most recent instance of the "political hostility" that the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government harbors towards Kerala.

The LDF has consistently alleged that the Centre is stifling Kerala's financial resources, thereby hindering the state's progress and social welfare initiatives.

The intention was to rally public sentiment against the Central government's purported infringements on fiscal federalism and perceived "discrimination" against Kerala, preceding the local body elections in 2025.

Additionally, due to its alleged impact on fiscal federalism, it was probable that the government would seek legal advice and turn to the Supreme Court for resolution of the dispute.