CCEA grants Rs 8,000 crore rupees for continuation and revamping of Infrastructure Viability Gap Funding

On November 12, 2020, the Cabinet Committee on Economic Affairs had approved the Continuation and Revamping of the Scheme for Financial Support to Public Private Partnership in Infrastructure Viability Gap Funding Scheme till 2024-25.

Key highlights

The main objective of the scheme is to promote PPP (Public-Private Partnership) in social and economic infrastructure for proper operation and maintenance, for efficient creation of assets and make the socially essential projects commercially viable.

The grant will cater social sectors such as water supply, waste water treatment, Health and Education sectors. The Central Government is to provide a maximum o 30% of the total project cost. An additional 30% will be provided by the State Government or the sponsoring Central Ministry.

What is Viability Gap Funding?

The major challenge faced by the infrastructure sector in India is lack of source of finance. Certain infrastructure projects may not be financially viable though they are economically justified. Such projects are generally of long term and developmental oriented. In order to implement such projects successfully, Viability Gap funding was designed. Viability Gap Funding is supporting those projects that are economically justified but not financially viable.

About the VGF Scheme

It was launched in 2004 to mainly support projects that fall under PPP model. Here the private sector sponsors are selected through competitive bidding. The usual grant is 20% of the total capital cost of the project. But this was increased to 30% when GoI announced the fourth tranche of Atma Nirbhar Bharat Abhiyan.

Only for the infrastructure sector, it was increased to 30%. The rest of the sectors are still continuing at 20%.

Fourth Tranche of Atma Nirbhar Bharat Abhiyan

It aimed to fast track investments in eight core sectors such as coal, defence, minerals, power distribution, civil aviation, social infrastructure, space, atomic energy. It is a part of the Rs 20 lakh crore economic stimulus package announced to deal with COVID-19.

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