VIABILITY GAP FUNDING SCHEME
WHY IN NEWS ?
- The Centre is likely to roll out the much-anticipated viability gap funding (VGF) scheme for coal gasification in the next two to three months.
WHAT IS VIABILITY GAP FUNDING SCHEME ?
- The Viability Gap Funding (VGF) Scheme aims at supporting infrastructure projects that are economically justified but fall marginally short of financial viability.
- Support under this scheme is available only for infrastructure projects where private sector sponsors are selected through a process of competitive bidding.
- The total VGF under the scheme does not exceed 20% of the total project cost.
- However,the Government may decide to provide additional grants up to a limit of a further 20%.
WHAT IS A VIABILITY GAP ?
- Not all projects that are executed under the public-private partnership (PPP) mode are economically feasible and financially viable.
- Some, while being economically sound, will fall short on financial viability, meaning the private sector will not be able to fund and execute such projects on its own.
- To solve this problem, governments typically step in to fund the gap – the amount that is needed to make the project financially viable.
- This gap is called the viability gap.
SECTORS QUALIFIED UNDER VGF :
List of sectors permissible for viability gap funding (VGF) include:
- Public infrastructure such as roads,
- airports Public amenities such as power,water supply, waste management.
- Infrastructure projects in special economic zones (SEZ) and
- National investment and manufacturing zones (NIMZ)
- Education, health and skill development
BENEFITS OF THE SCHEME:
- The aim of the scheme is to promote PPPs in social and Economic Infrastructure.
- It will lead 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 public at large as it would help in creation of the Infrastructure for the country.
SYLLABUS: PRELIMS, CURRENT AFFAIRS
