Finance Division through its PPP Unit will manage and disburse the VGF upon request made by the line Ministry through the office for PPP. Detailed Feasibility Study (DFS) is the pre-requisite for availing VGF for any BOT project. Economic Rate of Return (ERR) will be determined through conducting DFS.
However, the following steps shall be followed in order to finalize the decision on VGF financing and make disbursement of VGF against a PPP Project :
(a) Implementing Agency proceed to the next phase with the project that has received In-Principle approval to conduct Detailed Feasibility Study (DFS). The objective of DFS is to develop a feasible, bankable, and affordable PPP project structure and estimate VGF required if any. If requirement of VGF is identified the Line Ministry submit the case to PPP Office in the prescribed format. The concerned Implementing Agency should certify, with reasons:
i) that the tariff/user charge cannot be increased to eliminate or reduce the viability gap of the PPP;
ii) that the Project Term cannot be increased for reducing the viability gap; and
iii) that the capital costs are reasonable and based on the standards and specifications normally applicable to such projects and that the capital costs cannot be further restricted for reducing the viability gap.
(b) PPP Office reviews the VGF identification to assess the accuracy and necessity of VGF through undertaking the following actions :
i) Review Financial Model that has been used to identify VGF to ensure completeness, accuracy and adequacy of calculations and underlying assumptions;
ii) Review PPP Structure to assess value for money and the necessity of VGF;
iii) PPP Office may ask for further information necessary for conducting such review.
(c) Based on these review PPP Office send the proposal to the PPP Unit of the Finance Division on behalf of the Line Ministry.
(d) PPP Unit, Finance Division reviews the VGF proposal to assess the eligibility for VGF and prioritize the proposal received through undertaking the following actions :
i) Assess that VGF does not exceed 30% of the project estimated cost excluding land;
ii) Rank the received VGF proposals in order of ERR and recommend available VGF budget accordingly.
iii) PPP Unit may ask for further information necessary for conducting such review.
(e) Based on these review PPP Unit prepares the summary of the proposal which will be appraised through the following VGF Appraisal Committee for making recommendation and finally obtain the approval of the Finance Minister.
(f) The composition of VGF Appraisal Committee will be as follows :
(i) | Additional Secretary, Finance Division | Chairperson |
(ii) | Joint Chief, Concern Sector Division, Planning Commission | Member |
(iii) | Joint Secretary/Joint Chief, Line Ministry | Member |
(iv) | Joint Secretary (TDM), Finance Division | Member |
(v) | Representative of PPP Office | Member |
(vi) | Deputy Secretary, PPP Unit, Finance Division | Member-Secretary |
(g) The line Ministry/Implementing Agency is authorized to initiate the Tender Process only on receipt of the approval on VGF proposal and publish Request for Qualification (RFQ) and Request for Proposal (RFP) including the provision of VGF.
(h) The Qualification and Tender Evaluation Committee (QTEC) review all Tenders in accordance with the criteria prescribed in the RFP. Fulfillment of all the criteria set out in the RFP and all other parameters, the tenderer with the lowest VGF requirement will be invited for negotiations by the Implementing Agency/Line Ministry. Following successful negotiations Implementing Agency/Line Ministry submits the recommendation of QTEC for VGF to the PPP Unit through PPP Office in prescribed format for concurrence.
(i) Any PPP Project requiring VGF shall be submitted for final approval by the CCEA irrespective of project classification by investment size as mentioned in the Policy and Strategy for Public-Private Partnership 2010.
(j) The PPP Unit, Finance Division, the Lead Financial Institution and the Private Sector Company (Private Partner) shall enter into a Tripartite Agreement for the purposes of disbursement of the VGF grant. The VGF agreement to be signed by the parties will be included in PPP Contract.