The Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi has approved the continuation and revamping of the scheme for financial support to public-private partnerships (PPPs) in the infrastructure viability gap funding (VGF) Scheme till 2024-25 with a total outlay of Rs 81 billion.
The revamped scheme is mainly related to the introduction of two sub-schemes for mainstreaming private participation in social infrastructure, a government release said on Wednesday.
The first sub-scheme would cater to social sectors such as wastewater treatment, water supply, solid waste management, health and education. 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 per cent operational cost recovery.
The Central Government will provide a maximum of 30 per cent of the total project cost (TPC) of the project as VGF and state government or sponsoring central ministry or statutory entity may provide additional support up to 30 per cent of TPC.
The second sub-scheme would support demonstration and pilot social sector projects. The projects may be from the health and education sectors, where there is at least 50 per cent operational cost recovery. In such projects, the Central Government and the state governments together will provide up to 80 per cent of capital expenditure and up to 50 per cent of operation & maintenance costs for the first five years.
The Central Government will provide a maximum of 40 per cent of the TPC of the project. Besides, it may provide a maximum of 25 per cent 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 TPC of Rs 342.28 billion and VGF of Rs 56.39 billion. Till the end of the financial year 2019-20, a VGF of Rs 43.75 billion was disbursed.
The scheme aims to promote PPPs in social and economic infrastructure leading to efficient creation of assets and ensuring their proper operation & maintenance and make them economically and 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.
The new scheme will come into force within one month of the approval of the Union Cabinet. Proposed amendments under the revamped VGF scheme would be suitably incorporated in the guidelines. Government agencies will take the necessary steps for the promotion of the revamped VGF and in the monitoring of the supported projects.
Revamping of the proposed VGF scheme is expected to attract more PPP projects and facilitate private investment in the social sectors like health, education, wastewater, solid waste management, water supply, etc. The creation of new hospitals and schools is expected to provide new jobs.