Viability Gap Funding (VGF) Scheme

The Finance Ministry approved the revised Viability Gap Funding Scheme for social infrastructural development in the country on December 11, 2020. The main aim of this scheme is financial support to PPPs i.e., Public-Private Partnerships. Initially the scheme covered only economic infrastructure in its scope but now infrastructure at a whole including social as well as economic both, is aimed to be covered. It aims to give a boost to the infrastructure sector in the country. This scheme will be renamed as Scheme for Financial Support to Public Private Partnerships (PPPs). It will be governed fully by the Ministry of Finance and will come into force soon.

Scheme Overview:

More scheme for employment opportunities

Scheme Objectives and Benefits:

• The main objective of the scheme, to give a boost to the infrastructure sector in the economy
• It will cover economic as well as social infrastructure areas
• Various projects will be taken up there by new employment opportunities will be generated
• Government will provide 20% funds of the total project cost for economic infrastructure projects
• It will also provide 30% funds for social infrastructural wherein water waste management, health sector, education sector, water supply, etc will be covered
• It aims at holistic infrastructural development thereby leading to overall economic development in the long run

Scheme Details:  

• Ministry of Finance revised and accordingly approved the existing Viability Gap Funding (VGF) Scheme on December 11, 2020
• This scheme will be implemented soon
• Previously this scheme covered economic infrastructure but now the government has widened its scope to cover whole of infrastructure including economic as well as social areas both.
• It is to be titled as Scheme for Financial support to Public Private Partnerships (PPPs) in infrastructure
• Under this scheme private companies will be selected by the government or authorised bodies through open competitive bidding
• Projects under this scheme will be then undertaken by these selected private sector companies
• Funding up to Rs. 200 crores will be sanctioned by the Empowered Committee (EC) headed by economic affairs secretary
• Projects requiring funds exceeding 200 crores will need approval from the Finance Minister.
• Under this scheme the central government will provide funds up to 20% of the Total Project Cost (TPC) for economic infrastructural projects
• It will also provide 30% of the TPC for social infrastructure
• In social infrastructure it plans to cover social factors like water supply, waste water management, health sector, education sector, sanitation, etc
• It will also tend to provide 40% of TPC for demonstration projects in the health and education sector
• This scheme is currently approved till 2024-25
• Total outlay of the scheme is Rs. 8,100 crores