Finance minister Nirmala Sitharaman Saturday said that government will spend Rs. 8100 crore to provide 30% viability gap funding (VGF) instead of the current 20% to boost private sector investment in social sector infrastructure creation.
“Government will enhance the quantum of viability gap funding upto 30% each of total project cost as VGF by centre and state statutory bodies," Sitharaman said. For other sectors, the existing VGF support of 20% will continue.
Social infrastructure projects “suffer from poor viability" and the fresh move by the government will boost private investments in social sector infra like schools and hospitals, the finance minister said while unveiling the fourth tranche of details related to the covid-19 financial package.
Under the scheme, the projects, however, will have to be proposed by central ministries, state governments and statutory entities. This means, the move will benefit public-private-partnership projects in social sectors at the central and state level.
VGF is a grant to help projects that are economically justified but not financially viable. Grants under VGF are offered as a capital subsidy to attract the private sector players to participate in PPP projects that are otherwise financially unviable.