VCF- new mantra along major corridors

In an initiative to cash in on smart city bonanza and other major infrastructure corridors, the government is all set to initiate value capture financing (VCF) for all infrastructure projects in the next Budget. The public financing tool, which is popular the world over, is based on the logic that the government makes large investments in public infrastructure, leading to rapid economic development in those areas resulting in higher land prices. In this connection, a value capture financing tool would mean tapping into this area through additional taxes and then using finances to fund future infrastructure projects in these areas. The move will require all infrastructure ministries to first identify the area of influence, which would not only include the actual project area, but also where the project would have an impact. Then the ministry would make a value impact assessment and understand how much financial value the project would generate over the next decade or two. These studies would be a part of the detailed project report (DPR) and the infrastructure ministry would then need to identify a VCF tool and then initiate consultations with the state governments. In this connection, MoU would be signed between the Centre and the State governments and urban local bodies. In addition, the MoU would include the ratio in which funds collected from application of VCF tool would be shared and put aside in an escrow account, said sources.