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Viability gap grants fail to take off

Viability gap grants fail to take off
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First Published: Tue, Aug 07 2007. 12 16 AM IST
Updated: Tue, Aug 07 2007. 12 16 AM IST
Two years after the government introduced a scheme to provide financial assistance through grants for public-private partnerships in commercially unviable infrastructure projects, not a single rupee of the approved sum of Rs4,264 crore has been disbursed, say finance ministry officials.
The scheme was approved by the cabinet committee on economic affairs in June 2005 to prevent lopsided growth in infrastructure and to promote private participation in areas that were considered commercially unviable.
“The fact that the earliest approved projects haven’t yet approached us for money shows that some of these projects may have run into roadblocks,” said a finance ministry official who did not wish to be identified.
He added that these could have to do with long project cycles or issues related to the acquisition of land.
“Clearly, some of these projects have not taken off on the ground,” said Harsh Shrivastav, vice-president, marketing for project management company Feedback Ventures Pvt. Ltd. “In some of these cases, it could be problems related to obtaining clearances, such as environmental clearances, from state governments,” he added.
The government offers up to 20% of the project cost as a grant and governments of the states where the projects are coming up are free to make a matching grant.
To date, the government has received only 31 requests for the so-called viability gap funding (VGF).
The government has approved 20 projects with a total cost of Rs18,157 crore, and cleared total grants of Rs4,264 crore.
Some analysts, however, said that the fact that there had not been any disbursals did not necessarily mean that the projects were running into trouble. “Some of these approvals are given before the bidding stage, and sometimes the bidding stage may take between six months and a year,” said Amrit Pandurangi, who heads the infrastructure and transportation practice at audit company PricewaterhouseCoopers.
Most of the projects approved are for developing the national highway network. The government has also granted an in-principle approval for the Hyderabad Mass Rapid Transit System, the bidding for which is yet to begin.
The VGF committee can sanction grants up to Rs200 crore per project. Requests for grants exceeding this limit can be sanctioned by the committee but only with the approval of the finance minister.
The grants will only begin once the special purpose vehicle that runs the project exhausts its equity contribution.
According to Feedback’s Srivastav, the VGF scheme could do with some promotion. “While the finance ministry claims it is not receiving enough requests, the real question is, what is it doing to create interest in this facility?” he asked.
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First Published: Tue, Aug 07 2007. 12 16 AM IST