Cabinet approves revamped VGF scheme with outlay of ₹8,100 crore

The revamped scheme will provide financial support to PPP projects in the infrastructure sector spread over a period of five years ending 2024-25.

The government on Wednesday approved the revamped viability gap funding (VGF) scheme envisaging a total outlay of ₹8,100 crore for encouraging investment in social as well as economic infrastructure projects.

The Cabinet Committee on Economic Affairs 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 told reporters here.

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 of ₹8,100 crore, ₹6,000 crore has been earmarked for PPP projects in the economic infrastructure segment and remaining ₹2,100 crore for social infrastructure projects, said an official release after the Cabinet meeting.

The earlier VGF scheme was limited to projects concerning economic infrastructure.

The revamped VGF scheme will attract more PPP projects and facilitate private investment in the social sectors (health, education, waste water, solid waste management and water supply, among others).

Creation of new hospitals and schools will create many opportunities to boost employment generation, according to an official release.

The new scheme will have two components. The sub-scheme-1 would cater to social sectors such as waste water treatment, water supply, solid waste management, health and education sectors, which often face bankability issues on account of poor revenue streams.

The projects eligible under the sub-scheme-1 should have at least 100 per cent operational cost recovery.

The central government will provide a maximum of 30% of the total project cost (TPC) of the project as VGF. State government, sponsoring central ministry or statutory entity may provide an additional support up to 30% of TPC.

The sub scheme-2 will support demonstration or pilot social sectors projects. The projects may be from 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 per cent of capital expenditure and up to 50 per cent 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.

In addition, 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, as many as 64 projects were accorded ‘final approval’ with a total project cost of ₹34,228 crore and VGF of ₹5,639 crore. Till the end 2019-20, VGF of ₹4,375 crore was disbursed.

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