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Cabinet approves continuation of viability gap funding for social infra projects

The Cabinet has approved continuation and revamping of the scheme for financial support to public private partnerships (PPPs) in infrastructure viability gap funding scheme till 2024-25 with a total fund outlay of Rs 8,100 crore

Finance Minister Nirmala Sitharaman Finance Minister Nirmala Sitharaman

Finance Minister Nirmala Sitharaman on Wednesday said that the Cabinet has approved continuation and revamping of the scheme for financial support to public private partnerships (PPPs) in infrastructure viability gap funding scheme till 2024-25 with a total fund outlay of Rs 8,100 crore. The aim of scheme is to promote PPPs in social and economic infrastructure leading to efficient creation of assets and ensuring their proper operation and maintenance. This would make the economically and socially essential projects commercially viable, said FM Sitharaman while briefing reporters after a meeting of the Cabinet.

The fund has been allotted keeping in mind that social infrastructure projects suffer from poor viability.

"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 monitoring of the supported projects," the Cabinet notified on Wednesday.

As per the Cabinet statement, revamping of the proposed VGF Scheme will attract more PPP projects and facilitate the private investment in the social sectors (health, education, waste water, solid waste management, water supply etc.). Creation of new hospitals, schools will create many opportunities to boost employment generation, it said.

The revamped scheme will be financed from budgetary support of Ministry of Finance.

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 support infrastructure projects undertaken through PPP mode. VGF up to 40 per cent of the total project cost is provided by the central government and the sponsoring authority in the form of capital grant at the stage of project construction (20 per cent + 20 per cent).

Since the inception of the scheme, 64 projects have got 'final approval' with 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.

Among others, the Cabinet has also approved Production Linked Incentives (PLI) scheme for 10 sectors, under which businesses will get incentives worth over Rs 2 lakh crore in 5 years. The move has been taken to enhance India's manufacturing capabilities and enhancing exports as well as to make Indian manufacturers globally competitive and attract investment.

Also Read: Cabinet approves PLI scheme worth Rs 2 lakh crore for 10 key sectors for next 5 years