Sri Vijaya Puram (Port Blair), April 13: Multiple arms of the government have raised concerns over the funding structure and commercial viability of the proposed ₹48,862 crore International Container Transshipment Port at Galathea Bay in Great Nicobar Island, even as the project has secured an in-principle recommendation from the Public Private Partnership Appraisal Committee.
According to the official Record of Discussion of the committee’s 142nd meeting, issued by the Department of Economic Affairs under the Ministry of Finance on April 2, 2026, questions were raised over whether the project, in its present form, fits the conventional framework of a public-private partnership and whether it qualifies for viability gap funding under existing rules.
Viability gap funding is government support extended to infrastructure projects under the public-private partnership route when they are seen as strategically or economically important but are not financially viable enough for private investors on their own. For the Great Nicobar port project, the Ministry of Ports, Shipping and Waterways has sought ₹12,230 crore in viability gap funding, equal to 25 percent of the total project cost.
The appraisal committee, which discussed the project on March 17 and 19, nevertheless recommended it for consideration by the competent authority, taking it a step closer to administrative approval.
Funding concerns
The sharpest objections came from the Department of Expenditure, which questioned whether the project would qualify for viability gap funding under the existing scheme administered by the Department of Economic Affairs. It also flagged the relaxations sought by the ministry, including exemption from pre-determined tariff norms, flexibility in grant disbursal and waivers on repayment obligations in the event of termination. According to the record, such departures may require changes to the existing framework and could need Cabinet approval.
The Department of Economic Affairs raised separate concerns over the project’s financial structure, including internal accruals, the debt-equity mix and the revenue model of the project authority, indicating unease over the viability of the proposed funding architecture.
NITI Aayog, meanwhile, examined the joint venture structure, concession triggers, public-sector shareholding and the likely impact of competition from Vizhinjam. Under the proposal, 55 percent equity is to be held by an Indian-owned and controlled private entity, while 45 percent will be held by select major ports, including Kamarajar Port Limited.
The chair’s observations, as recorded in the minutes, note that the current structure is not a typical public-private partnership model and may therefore not qualify for viability gap funding under prevailing norms. The record also suggests that if support is required, budgetary allocation by the sponsoring ministry may be a more appropriate route.
Viability questions
The project’s commercial viability also came under scrutiny. As a greenfield transshipment hub, Galathea Bay will have to compete with established regional ports such as Singapore and Colombo, while also facing emerging domestic competition. Officials raised questions over whether projected cargo volumes and revenues would be sufficient to support returns over the proposed 50-year concession period.
The port is to be developed on a Design-Build-Finance-Operate-Transfer basis, but members stressed the need for clearer allocation of risks such as demand uncertainty, construction delays and operational performance between the public and private sides.
The committee also called for robust bidder eligibility norms and closer vetting of the request for proposal and concession agreement, indicating that changes may be needed before the project moves ahead. The project is to be developed in phases, with the first two phases forming the initial components under consideration.
The proposal has already received environmental clearance from the Ministry of Environment, Forest and Climate Change in November 2022, while other approvals, including Consent to Establish and Consent to Operate, are to be obtained later.
The recommendation marks a key procedural advance for the Great Nicobar port project. But the official record makes clear that major questions remain over its public-private partnership structure, eligibility for viability gap funding and long-term financial viability.
