Govt revamps VGF scheme with outlay of ₹8,100-cr

Cabinet Committee on Economic Affairs (CCEA)

To encourage investment in economic as well as social infrastructure projects, the government has approved the revamping of the viability gap funding (VGF) scheme envisaging an outlay of ₹8,100 crore. The Cabinet Committee on Economic Affairs (CCEA) has approved continuation and revamping of the scheme for financial support to public-private partnerships (PPPs) in infrastructure VGF scheme till 2024-25. Information and Broadcasting Minister Prakash Javadekar informed that the revamped scheme will provide financial support to PPP projects in the infrastructure sector spread over a period of five years ending 2024-25. Of the total amount, ₹6,000 crore has been earmarked for PPP projects in the economic infrastructure segment and remaining ₹2,100 crore for social infrastructure projects. Before this, VGF scheme was limited to projects concerning economic infrastructure and now the scheme will attract more PPP projects and facilitate private investment in the social sectors (health, education, wastewater, solid waste management and water supply, among others). Creation of new hospitals and schools will create many opportunities to boost employment generation. The new scheme will have two components including the sub-scheme-1 to cater to social sectors such as wastewater treatment, water supply, solid waste management, health and education sectors, which often face bankability issues on account of poor revenue streams and eligible projects under the sub-scheme-1 should have at least 100% operational cost recovery. The central government will provide a maximum of 30% of the total project cost (TPC) of the project as VGF and the State government, sponsoring central ministry or statutory entity may provide additional support up to 30% of TPC. The sub-scheme-2 will support demonstration or pilot social sectors projects, which may be from the health and education sectors where there is at least 50% operational cost recovery. In such projects, central and state governments together will provide up to 80% of capital expenditure and up to 50% of operation and maintenance (O&M) costs for the first five years. The Centre will provide a maximum of 40% of the TPC of the project and also, it may provide a maximum of 25% of operational costs of the project in the first five years of commercial operations. Under the earlier VGF scheme, 64 projects were accorded 'final approval' with a total project cost of ₹34,228 crore and VGF of ₹5,639 crore.