Finance Ministry Notifies Updated Viability Gap Funding Scheme

In November, the Cabinet Committee on Economic Affairs approved the scheme till 2024-25 with a total outlay of Rs 8,100 crore.

The finance ministry on Monday, notified the updated Viability Gap Funding (VGF) scheme which gives a push to the social infrastructure sector in India along with extending the existing scheme to continue support to core sector infrastructure.

The new scheme, applicable with immediate effect, allows for funding up to Rs 200 crore to be sanctioned by an Empowered Committee (EC) headed by the economic affairs secretary, while projects requiring over Rs 200 crore would be approved by the EC with the approval of the finance minister.

Members of the EC include NITI Aayog CEO, expenditure secretary, secretary of the line ministry dealing with the subject and joint secretary in the Department of Economic Affairs as member secretary, the notification said.

The scheme, titled, Scheme for Financial Support to Public Private Partnerships (PPPs) in infrastructure, will be a central sector scheme administered by the finance ministry.

Projects under the scheme would be implemented by a private sector company as selected by the government or a statutory entity through a process of open competitive bidding.

In November, the Cabinet Committee on Economic Affairs approved the scheme till 2024-25 with a total outlay of Rs 8,100 crore.

While the Centre will continue to fund 20% of the total project cost (TPC) for economic infrastructure, as in the existing scheme since 2006, it will also provide 30% of TPC for social infrastructure in the waste water treatment, water supply, solid waste management, health and education sectors.

As per the notification, the VGF amount sanctioned under the scheme would be equal to a maximum of 30% of the lowest bid for capital grants in social infrastructure projects, and 20% for economic infrastructure projects.

Further, the scheme also allows for VGF up to 40% of TPC for pilot or demonstration projects in the health and education sector.