The most common form of Government support involves instruments that provide cash, assets or some other form of funding, often known as "funded" instruments, e.g. loans, grants, land, assets or equity. This is different from contingent support, where the Government support must be paid out or crystallizes only in certain circumstances, e.g. standby capital (debt, equity or grants), guarantees or indemnities.
| Box 5.4: (Mis)use of the Term "Viability Gap Funding" |
| The Indian Government has created a mechanism to pool capital contributions for PPP transactions (open to many sectors, but used primarily to date to support the roads sector)-see Box 5.7 below. The popularity of this mechanism has resulted in the term "viability gap funding" entering the common parlance in certain circles as a generic term for all Government support or capital contribution programs. There is a strong risk of confusion with the Indian program (which involves only one form or, and approach to, Government support) and therefore this generic version of the term will not be used in this text. |
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| Box 5.5: India's Viability Gap Fund |
| In 2004, the Government of India launched the Scheme for Financial Support of PPPs in Infrastructure, now more commonly known as the Viability Gap Funding (VGF) scheme. VGF provides up-front capital grants at the construction stage. These grants may not exceed 20% of the project cost and are disbursed only after the private company has made its required equity contribution. Sponsoring ministries or state Governments may provide additional grants, but these may not exceed an additional 20% of the project cost. No economic cost benefit assessment is performed, relying instead on sector regulation and competitive procurement to identify the need for Government contribution. |