Two sub-schemes introduced for private sector participation
The Cabinet Committee on Economic Affairs has approved on 11 Nov 2020 Continuation and Revamping of the Scheme for Financial Support to the Public Private Partnerships (PPPs) in Infrastructure Viability Gap Funding (VGF) Scheme till 2024-25 with a total outlay of Rs.8,100 crore.
The revamped Scheme is mainly related to the introduction of the following two sub-schemes for mainstreaming private participation in social infrastructure:
Sub scheme-1
This would cater to Social Sectors such as Waste Water Treatment, Water Supply, Solid Waste Management, Health and Education sectors etc. These projects face bankability issues and poor revenue streams to cater fully to capital costs.
The projects eligible under this category should have at least 100% Operational Cost recovery.
The Central Government will provide a maximum of 30% of Total Project Cost (TPC) of the project as VGF and State Government/Sponsoring Central Ministry/Statutory Entity may provide additional support up to 30% of TPC.
Sub scheme-2
This Sub scheme will support demonstration/pilot social sector projects. The projects may be from the Health and Education sectors where there is at least 50% Operational Cost recovery.
In such projects, the Central Government and the State Governments together will provide up to 80% of capital expenditure and up to 50% of Operation & Maintenance (O&M) costs for the first five years.
The Central Government 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.
Since the inception of the scheme, 64 projects have been accorded ‘final approval’ with a Total Project Cost of Rs.34,228 crore and VGF of Rs.5,639 crore. Till the end of Financial Year 2019-20, VGF of Rs. 4,375 crore has been disbursed.
Benefits:
The aim of the scheme is to promote PPPs in social and Economic Infrastructure leading to efficient creation of assets and ensuring their proper Operation and Maintenance and make the economically/socially essential projects commercially viable.
The scheme would be beneficial to the public at large as it would help in the creation of the Infrastructure for the country.
Implementation Strategy:
The new Scheme will come into force within one month of the approval of the Cabinet. Proposed amendments under the revamped VGF scheme would be suitably incorporated in the Guidelines for the Scheme.
All steps will be taken up for the promotion of the revamped VGF and in the monitoring of the supported projects.
Impact:
Revamping of the proposed VGF Scheme will attract more PPP projects and facilitate private investment in the social sectors (Health, Education, Waste Water, Solid Waste Management, Water Supply etc.). The creation of new hospitals, schools will create many opportunities to boost employment generation.
Expenditure Involved:
The revamped Scheme will be financed from budgetary support of the Ministry of Finance. The projected outlay of the revamped VGF scheme till the Financial Year 2024-2025 is as under:
Financial Year 2020-21;
Scheme for Financial Support to PPPs in Economic Infrastructure Rs.1,000 crore;
Scheme for Financial Support to PPPs in Social Infrastructure Rs.400 crore.
Financial Year 2021-22;
Scheme for Financial Support to PPPs in Economic Infrastructure Rs.1,100 crore;
Scheme for Financial Support to PPPs in Social Infrastructure Rs.400 crore
Financial Year 2022-23;
Scheme for Financial Support to PPPs in Economic Infrastructure Rs.1,200 crore;
Scheme for Financial Support to PPPs in Social Infrastructure Rs.400 crore.
Financial Year 2022-23;
Scheme for Financial Support to PPPs in Economic Infrastructure Rs.1,200 crore;
Scheme for Financial Support to PPPs in Social Infrastructure Rs.400 crore.
Financial Year 2023-24;
Scheme for Financial Support to PPPs in Economic Infrastructure Rs.1,300 crore;
Scheme for Financial Support to PPPs in Social Infrastructure Rs.400 crore.
Financial Year 2024-25;
Scheme for Financial Support to PPPs in Economic Infrastructure Rs.1,400 crore;
Scheme for Financial Support to PPPs in Social Infrastructure Rs.500 crore.
Background:
The Department of Economic Affairs, Ministry of Finance introduced “the Scheme for Financial Support to PPPs in Infrastructure” (Viability Gap Funding Scheme) in 2006 with a view to supporting infrastructure projects undertaken through PPP mode that are economically justified but commercially unviable due to large capital investment requirements, long gestation periods and the inability to increase user charges to commercial levels, hi this existing Scheme, VGF up to 40% of the Total Project Cost (TPC) is provided by the Government, of India and the sponsoring authority in the form of capital grant at the stage of project construction (20%+20%). #tenders #projects #infrastructure #developments #investments #PPP /fiinews.com
