Thiruvananthapuram MP Sashi Tharoor said that he was "shocked" by the Centre's decision to provide its share of viability gap funding (VGF) as a loan for the Vizhinjam International Seaport Project.

"This should be seen as a grant and not a loan. Or else Kerala will have to repay a substantial chunk of its revenue from port operations to the Centre. It is not fair," Tharoor told reporters at Vizhinjam on Monday. Prime Minister Narendra Modi will commission the project on May 2.

Chief Minister Pinarayi Vijayan had also termed the Centre's 'VGF as loan' decision "bizarre" last December. However, in a sudden and inexplicable about-turn, the LDF government unconditionally accepted the Centre's terms in the first half of April.

Initially, the Centre and the state government had jointly agreed to provide VGF for the Vizhinjam project. The VGF was divided equally: ₹817.80 crore by the Centre and ₹817.20 crore by Kerala. Together (₹1,635), the VGF makes up 40 per cent of the Vizhinjam project cost.

In December 2024, Union Finance Minister Nirmala Sitharaman shot off a missive to Chief Minister Pinarayi Vijayan, saying the Centre's share would be given only as a loan to the state. In return, Sitharaman said that Kerala should repay 20% of the profits from the operations of the transhipment terminal.

"If we give in, and considering the interest, Kerala will end up paying ₹ 12,000 crore to the centre," the CM had then said. But in three months, the defiance vanished.

On Monday, Tharoor said that Kerala could not afford to accept the VGF as a loan. "Perhaps the state had consented so that the project could go ahead," the MP said.

"But right from the start, I was clear that the VGF would be provided as a grant. Even when I was called to Jaitley's office (the then Union Finance Minister) and told that the VGF was approved, my understanding was that this was a grant. He is not with us to confirm it. I have no idea how the policy changed, and where the file that restructured the grant into a loan is," he said.

Tharoor said VGF as loan was unacceptable. "The entire concept of viability gap funding is to bridge the financial difference between the cost of a project and the gains from the project so that it becomes viable. It is improper to offer the VGF as a loan. We should not stop discussing this," he said.

When he was told that the agreement was already signed, he sounded sympathetic of the LDF government. "What can we do. Shouldn't we take the project forward," he said.

Tharoor is optimistic that the Centre would rethink its VGF policy. "Any government can always change its mind, and convert a loan into a grant. It can happen any time. Can't I give you a loan and later change the terms in your favour. A government, too, can do this. So we should keep asking," he said.

Tharoor hinted that the Kerala government had to lead the fight. "I can only raise the issue during the meeting of the director board. It is up to the state government to take action," he said, and added: "I hope the Chief Minister will do his best," he said.

Except for the VGF issue, Tharoor said the Centre was highly supportive of the Vizhinjam project.