Scheme for Financial Support to Public Private Partnerships in Infrastructure (Viability Gap Funding Scheme)
Cabinet Committee on Economic Affairs (CCEA) in its meeting of July 25, 2005 approved the Scheme for Financial Support to PPPs in Infrastructure (Viability Gap Funding scheme) as a Central Sector Scheme of the Government of India. The Scheme is administered by the Department of Economic Affairs, Ministry of Finance and provides financial support in the form of grants, one time or deferred, to economically desirable but commercially unviable infrastructure projects undertaken through PPPs with a view to make them commercially viable.
CCEA on 11.11.2020 approved the revamped VGF Scheme and Guidelines for the same were notified by DEA on 07.12.2020. The revamped scheme includes higher VGF support of upto 60% of the Total Project Cost (maximum up to 30% by the Central and State Governments each) for the social sectors i.e. Water Supply, Waste Water Treatment, Solid Waste Management and Health, Education, and upto 80% of the Total Project Cost (maximum up to 40% by the Central and State Governments each) for Pilot/Demonstration Projects in Health and Education sectors. In addition, the provisions for O&M Support have also been included for the Pilot/Demonstration projects in Health and Education sectors in the first 5 years of operations up to 50% of the O&M Costs (maximum upto 25% by the Central and State Governments each). For other sector projects, Viability Gap Funding up to 40% of the Total Project Cost (maximum upto 20% by the Central and State Government each) is available.
The VGF Scheme is administered by the Empowered Committee.
Composition of Empowered Committee
Secretary (Economic Affairs)
Secretary (Expenditure)
Joint Secretary, DEA- Member Secretary
CEO, NITI Aayog
Secretary of the line Ministry dealing with the subject
The Scheme requires the Project Sponsoring Authorities to seek ‘In-Principle’ approval of the Empowered Committee prior to seeking bids and obtain the ‘Final Approval’ after the selection of the bidder. The actual disbursement takes place once the private entity has expended its portion of the equity and proportion to the debt released by the Lead Financial Institution. Thus, there is necessarily a time lag involved between grant of ‘In-Principle’ approval and disbursement of grant. The intervening stage involves finalisation of document, prequalification of bidders, financial bids being called, selection of bidder, financial closure and commencement of construction.The relevant documents for VGF Scheme along with Annexures are as follows: