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Viability Gap Funding Scheme for Infrastructural Development

W N Deulkar and A F Shaikh
D. Y. Patil College Of Engineering, Akurdi, Pune-411044, India

Abstract—India has one of the largest road networks in the world, aggregating around 3.3 million km. historically, the budgetary resources from the governments have been the major source of finance for infrastructure such as road projects. The reduction in the budgetary allocation towards roadway and increasing demands from other sectors, such as social and economic infrastructure and the limitations in the traditional public procurement system, have resulted in deficiencies in the road network leading to capacity constraints, delay, congestion, fuel wastages. In order to remove the deficiencies and to upgrade the road network to world-class standards, Ministry of Finance Department (MFD) and Department of Economic Affairs (DEA) have introduced a scheme to support the Public Private Partnership (PPP) in infrastructure. Government of India (GOI) has made provision to financially support the viability gap to the tune of 20% of the cost of the project in the form of capital grant from its viability gap fund. The scheme is confined to PPP projects taken by the GOI or its agencies, where the private sector is selected through open competitive public bidding. Infrastructure development is a crucial sector recognized in the current Five Year Plan. Even State Government’s vision 2020 envisages huge requirement of Rs.169,918 cr considering five years’ shelf of projects in various sectors. Similarly such projects are not financially viable on stand alone basis as they have long gestation period and having limited financial return. Hence, they are not attractive to the private sector. State government has therefore introduced a new scheme for extending financial support to such PPP Projects in the sectors of infrastructure called as Viability Gap Funding Scheme (VGF). 

Index Terms—VGF, road network, infrastructure, PPP, investment

Cite: W N Deulkar and A F Shaikh, "Viability Gap Funding Scheme for Infrastructural Development," International Journal of Structural and Civil Engineering Research, Vol. 2, No. 4, pp. 123-127, November 2013.