The Government of India under the Financial Support for PPPs in Infrastructure has introduced a Viability Gap Funding Scheme. Infrastructure projects are often not commercially viable on account of having substantial sunk investment and low returns, they however continue to be economically essential. The Scheme has been formulated which provides financial support in the form of grants, one time or deferred, to infrastructure projects undertaken through public private partnerships with a view to make them commercially viable. The Scheme provides total Viability Gap Funding up to twenty percent of the total project. The Government or statutory entity that owns the project may, if it so decides, provides additional grants out of its budget up to further twenty percent of the total project cost.
The guidelines for forwarding proposals for Financial Support to PPP in Infrastructure under (VGF scheme) is can be downloaded from the link:
http://finmin.nic.in/the_ministry/dept_eco_affairs/ppp/GuidelinesPPPapp250106.pdf
Annexure 12A to this Module provides an excerpt of the Scheme for Support of PPPS in Infrastructure which is published under the guidelines for forwarding proposals for financial support to PPPs in infrastructure (VGF Scheme).
| Financial Support to PPP in Infrastructure - Viability Gap Funding Scheme VGF plays a major role in making a project financially viable. Infrastructure projects have long gestation periods and, in certain cases, are not financially viable on their own. It may not be possible to fund the very large investment requirements of these projects fully from the budgetary resources of the Government of India alone. In order to remove this shortcoming and to bring in private sector resources and techno-managerial efficiencies, the Government is promoting Public Private Partnerships (PPP) in infrastructure development through VGF. This facility reduces the capital costs of the projects and makes them viable and attractive for private investments through supplementary grant funding. Provisions for this facility are made on a year to year basis. Source: Guidelines for forwarding proposals for Financial Support to PPP in Infrastructure |