Cabinet approves revamping and continuation of VGF scheme to strengthen social and economic infrastructure
In order to provide financial support to various public-private partnerships (PPPs) for core sector infrastructure, the Cabinet Committee on Economic Affairs has approved the continuation and revamping of PPPs in the infrastructure viability gap funding (VGF) scheme till 2024-2025. The total outlay of the scheme is Rs 8,100 crore. The scheme is intended to ramp up social sectors like Health, Education, Water Supply, Waste Water Treatment, Solid Waste Management among others.
These projects are facing bankability issues in terms of poor revenue streams to meet the capital costs while these projects are required to have 100 percent operational cost recovery. As per the provisions of this scheme, 30 percent of the total project cost will be provided by the central government as VGF while 30 percent more will be provided by the state government or the sponsoring central ministry or any statuary entity.
In the projects where at least 50 percent operation cost recovery is there, the central and state governments will together provide up to 80 percent of the capital expenditure, besides Operation and Maintenance costs up to 50 percent for the starting five years. The central government, however, will provide a maximum of 40 percent of the total project cost.
Under this scheme, a total of 64 projects have been accorded final approval with VGF of Rs 5,639 crore. The scheme aims to promote PPPs in both social and economic infrastructure for efficient creation of assets and to ensure their operation and maintenance property. Further, it intends to make the projects commercially viable.
The scheme, in a nutshell, would be beneficial for the public by helping in creating an infrastructure for the nation.
The revamping of the proposed VGF Scheme will offer benefits in terms of attracting more PPP projects to facilitate private investment in various social sectors. The scheme will be financed through budgetary support offered by the Ministry of Finance.
The outlay projected under the revamped VGF till FY 2024-25 is Rs 400 crore for financial support to PPPs in Social Infrastructure while for PPs in economic infrastructure, it provides Rs 1100 crore FY-2021-2022. For FY-2022-23 the projected outlay for economic infrastructure is Rs 1200 crore and Rs 400 crore is the projected allocation for financial support in social infrastructure. For FY-2023-2024, the projected outlay for economic infrastructure is Rs 1,300 crore and for social infrastructure, the amount stands at Rs 400 crore while for FY 2024-2025, the projected outlay for economic infrastructure is Rs 1400 crore and it’s Rs 500 crore for social infrastructure.
