The Kerala government has decided to accept the central government’s Rs 8.178 billion Viability Gap Funding (VGF) for the Vizhinjam International Port, agreeing to repay the amount under the Net Present Value (NPV) model. The decision was taken during a state cabinet meeting chaired by Chief Minister Pinarayi Vijayan.

Funding Dispute Between Kerala and the Centre Initially, the Kerala government had requested the Centre to release the VGF share without repayment conditions, arguing that the Outer Harbour Container project at Tuticorin Port, which follows a similar financial model, was not subjected to such a requirement. However, the Union government rejected this request, stating that the two projects could not be compared in terms of financial structuring.

In October last year, Chief Minister Vijayan had written to Finance Minister Nirmala Sitharaman, urging her to reconsider the repayment condition. He argued that the Department of Economic Affairs' Empowered Committee’s decision to impose repayment would create a financial burden of ?10,000–?12,000 crore for the state.

Despite Kerala’s objections, the state has now agreed to accept the funds under the Centre’s terms, ensuring the continuation of the Vizhinjam Port project, which is being developed in collaboration with Adani Ports.

Significance of Vizhinjam Port The Vizhinjam International Seaport, located near Thiruvananthapuram, is a strategically significant deepwater port designed to handle large container ships and enhance India's maritime trade competitiveness.

Once completed, it is expected to:

Reduce India’s dependence on foreign transshipment hubs like Colombo and Singapore.

Boost Kerala’s economy by generating employment and attracting global shipping companies.

Improve logistics efficiency, reducing turnaround times for cargo movement.

Despite funding hurdles, the first phase of the project is nearing completion, with operations expected to begin soon. The acceptance of central funds, though under conditional terms, ensures that the state can move forward with infrastructure development, port expansion, and associated connectivity projects.