The proposed Vizhinjam deepwater port and international transhipment terminal in Kerala has become the first to be granted viability gap funding (VGF) by the Centre. A decision to this effect was taken at a meeting of an empowered panel under the Union Finance Ministry recently. VGF is a one-time grant provided to support infrastructure projects that are economically justified but fall short of 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 Rs 800 crore for the Vizhinjam project as the Centre´s share. The state government can decide to put up an equivalent share of its own. 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.