Rs 8,100 Crore Financial Assistance For Infra Viability Gap Funding Gets Nod

The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved continuation and revamp of Scheme for Financial Support to Public-Private Partnerships (PPPs) in Infrastructure till 2024-25 with a total outlay of Rs 8,100 crore. An official release said revamped Viability Gap Funding Scheme mainly relates to two sub-schemes for mainstreaming private participation in social infrastructure:

The sub-scheme 1 would cater to social sectors such as wastewater treatment, water supply, solid waste management and health and education sectors.

The release said these projects face bankability issues and poor revenue streams to cater fully to capital costs.

The projects eligible under this category should have at least 100 per cent operational cost recovery.

The central government will provide a maximum of 30 per cent of Total Project Cost (TPC) of the project as VGF and state government or sponsoring central ministry or statutory entity may provide additional support up to 30 per cent of the cost.

The sub-scheme 2 will support demonstration/pilot social sectors projects. The projects may be from the health and education sectors where there is at least 50 per cent operational cost recovery. In such projects, the central government and the state governments together will provide up to 80 per cent of capital expenditure and up to 50 per cent of operation and maintenance (O&M) costs for the first five years.

The release said that the central government will provide a maximum of 40 per cent of the TPC. In addition, it may provide a maximum of 25 per cent of operational costs of the project in the first five years of commercial operations.

Since the inception of the scheme, 64 projects have been accorded final approval with TPC of Rs 34,228 crore and VGF of Rs 5,639 crore.

VGF of Rs 4,375 crore has been disbursed till the end of 2019-20.

The release said that the aim of the scheme is to promote PPPs in social and economic Infrastructure leading to efficient creation of assets and ensuring their proper operation and maintenance and make the economically/socially essential projects commercially viable.

The scheme would help in the creation of infrastructure in the country, the release said.

The new scheme will come into force within one month of the approval of cabinet.

The release said that revamping of the proposed VGF Scheme will attract more PPP projects and facilitate private investment in sectors such as health, education, wastewater, solid waste management, and water supply. Creation of new hospitals, schools will create many opportunities to boost employment generation.

It said Finance Ministry introduced "the Scheme for Financial Support to PPPs in Infrastructure" (Viability Gap Funding Scheme) in 2006 with a view to support infrastructure projects undertaken through PPP mode that are economically justified but commercially unviable due to large capital investment requirements, long gestation periods and the inability to increase user charges to commercial levels.