Viability Gap Funding (VGF)
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7/25/2015 Vi abi l i ty Gap Fundi ng ( VGF) - Arthapedi a http://www.ar thapedi a.i n/index.php?title=Viability Gap Funding_(VGF) 1/2 Share Viability Gap Funding (VGF) From Arthapedia Viability Gap Funding (VGF) Means a grant one-time or deferred, provided to support infrastructure projects that are economically ju stified but fall short of f inancial viability. The lack of fin ancial viability usually arises from long gestation periods and the inability to increase user charges to commercial levels. Infrastructure projects also involve externalities that are not adequately captured in direct financial returns to the project sponsor. Through the provision of a catalytic grant assistance of the capital costs, several projects may become bankable and help mobilise private investment in infrastructure. Government of India has notified a scheme for Viability Gap Funding to infrastructure projects that are to be undertaken through Public Private Partnerships. It will be a Plan Scheme to be administered by the Ministry of Finance with suitable budgetary provisions to be made in the Annual Plans on a year-to- ear basis. The quantum of VGF provided under this scheme is in the form of a capital grant at the stage of project construction. The amount of VGF will be equivalent to the lowest bid for capital subsidy, but subject to a maximum of 20% of the total project cost. In case the sponsoring Ministry/State Government/ statutory entity propose to provide any assistance over and above the said VGF, it will be restricted to a further 20% of the total project cost. Support under this scheme is available only for infrastructure projects where private sector sponsors are selected through a process of competitive bidding. The project agreements must also adhere to best practices that would secure v alue for public money and safeguard user interests. T he lead financial institution for the project is responsible for regular monitoring and periodic evaluation of project compliance with agreed milestones and performance levels, particularly for the purpose of grant disbursement. VGF is disbursed only after the private sector company has subscribed and expended the equity contribution required for the project. References 1. http://www.infrastructure.gov.in Contributed by Jithesh John, IES(2001) (http://www.ies.gov.in/myaccount- profile-view.ph p?memid=285) Email- [email protected] (mailto:[email protected]) Retrieved from "http://www.arth apedia.in/index.php?title=Vi ability_Gap_Funding _(VGF)" Category: Concepts This page was last modified on 10 April 2015, at 10:53.
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7/25/2015 Viability Gap Funding (VGF) - Arthapedia
http://www.arthapedia.in/index.php?title=Viability_Gap_Funding_(VGF) 1/2
Share
Viability Gap Funding (VGF)From Arthapedia
Viability Gap Funding (VGF) Means a grant one-time or deferred, provided to support infrastructureprojects that are economically justified but fall short of financial viability. The lack of financial viabilityusually arises from long gestation periods and the inability to increase user charges to commercial levels.Infrastructure projects also involve externalities that are not adequately captured in direct financialreturns to the project sponsor. Through the provision of a catalytic grant assistance of the capital costs,several projects may become bankable and help mobilise private investment in infrastructure.
Government of India has notified a scheme for Viability Gap Funding to infrastructure projects that areto be undertaken through Public Private Partnerships. It will be a Plan Scheme to be administered by theMinistry of Finance with suitable budgetary provisions to be made in the Annual Plans on a year-to-year basis.
The quantum of VGF provided under this scheme is in the form of a capital grant at the stage of projectconstruction. The amount of VGF will be equivalent to the lowest bid for capital subsidy, but subject toa maximum of 20% of the total project cost. In case the sponsoring Ministry/State Government/ statutoryentity propose to provide any assistance over and above the said VGF, it will be restricted to a further20% of the total project cost.
Support under this scheme is available only for infrastructure projects where private sector sponsors areselected through a process of competitive bidding. The project agreements must also adhere to bestpractices that would secure value for public money and safeguard user interests. The lead financialinstitution for the project is responsible for regular monitoring and periodic evaluation of projectcompliance with agreed milestones and performance levels, particularly for the purpose of grantdisbursement. VGF is disbursed only after the private sector company has subscribed and expended theequity contribution required for the project.
References
1. http://www.infrastructure.gov.in
Contributed by
Jithesh John, IES(2001) (http://www.ies.gov.in/myaccount-profile-view.php?memid=285)Email- [email protected] (mailto:[email protected])
Retrieved from "http://www.arthapedia.in/index.php?title=Viability_Gap_Funding_(VGF)"Category: Concepts
This page was last modified on 10 April 2015, at 10:53.
