1. Viability Gap FundingViability Gap Funding
ByBy
Ashok ChawlaAshok Chawla
Additional SecretaryAdditional Secretary
Department of Economic Affairs, Government of IndiaDepartment of Economic Affairs, Government of India
2020thth
December, 2006December, 2006

2. December 20, 2006 PPP Cell, Department of E
Infrastructure – Indicative Investment
Sector Investment
(Rs. in crore)
To be made by
National
Highways
2,20,000 2012
Airports 40,000 2010
Ports 50,000 2012
Energy 5,40,000 2012

3. December 20, 2006 PPP Cell, Department of E
New Approach
 Promote flow of private capital in
infrastructure through Public Private
Partnerships (PPPs)
 Progress uneven over the past few years

4. December 20, 2006 PPP Cell, Department of E
PPPs in India – Issues
 Political commitment
 Legal and regulatory framework
 Commercial viability
 Inclusive growth
 Acceptable risk sharing
 Capacity in the line organizations

5. December 20, 2006 PPP Cell, Department of E
Recent GOI Initiatives
 Viability Gap Funding Scheme
 India Infrastructure Finance Company
Limited (IIFC)
 Capacity Building in States for PPPs

6. December 20, 2006 PPP Cell, Department of E
Scenario for implementing PPPs
 The new initiative seeks to cover PPPs where
– private sector provides infrastructure services for a fee
under a concession agreement
– concession is granted on the basis of a transparent bidding
process
– the bidder is asked to quote the quantum of grant required
(positive or negative)
– the bidder is assured of a stable environment through a
concession agreement

7. December 20, 2006 PPP Cell, Department of E
Viability Gap Funding Scheme
 Viability Gap Funding (VGF) Scheme to
address the following concerns:
– Address the issue of ‘affordability’ of user fee
– Leverage government grant to improve
commercial viability of projects
– Promote user pay principle
– Ensure market based selection of promoter
– Promote concept of developer (in place of
contractor) and address project life cycle costs

8. December 20, 2006 PPP Cell, Department of E
VGF Scheme – Eligible Sectors
 Transportation
 Energy
 Urban Infrastructure
 Tourism infrastructure projects
 Industrial infrastructure projects (eg. SEZs)
 Any other

9. December 20, 2006 PPP Cell, Department of E
VGF Scheme – GOI Support
 Funding by GOI limited to 20% of Project
Cost.
 If required, an additional 20% can be made
available by the sponsoring Ministry/agency
 GOI funding normally as capital grant during
construction.

10. December 20, 2006 PPP Cell, Department of E
VGF Scheme – Disbursement of Grant
 Grant to be disbursed after the private sector
company has subscribed and expended its
equity contribution
 Grant will be released in proportion to the
disbursement of the remaining debt
 Grant released through the Lead Financial
Institution

11. December 20, 2006 PPP Cell, Department of E
VGF Scheme - Approval Process
 For speedy appraisal, Empowered Institution and Empowered
Committee set up
 Viability Gap Funding up to Rs. 100 crore for each project will
be sanctioned by the Empowered Institution
 Proposals up to Rs. 200 crore will be sanctioned by the
Empowered Committee, and
 Amounts exceeding Rs. 200 crore will be sanctioned by the
Empowered Committee with the approval of Finance Minister
 Limits likely to be revised upwards

12. December 20, 2006 PPP Cell, Department of E
VGF Scheme - Status
 Status available on website: pppinindia.com
 Proposals received: 35
 Sectors: Highways, MRTS, Solid Waste
Management, Railways, Power
 Grant of “in principle” approval: 17

13. December 20, 2006 PPP Cell, Department of E
IIFC
 Commercially viable projects that face problem in
raising long term debt
 Leverage GOI guarantees to meet the long term
debt needs of infrastructure projects
 Supplement funding by banks and IFIs
 GOI guarantees to IIFC to raise funds in the market
 2005-06: borrowing limit fixed at Rs. 10,000 crore

14. December 20, 2006 PPP Cell, Department of E
Capacity Building
 Develop shelf of projects
 ‘Infrastructure’ & ‘PPP’ be entered as subjects in the Rules of
Business Transaction and assigned to one Department for
focus with ‘PPP Cells being created for greater focus
 Infrastructure departments to set own financial targets of
attracting private investment through PPP and these be
monitored and reviewed as ‘Plan outside of Plan’-as part of XI
Plan
 GOI assistance for capacity building – consultants, database,
training – assistance from ADB, WB

15. December 20, 2006 PPP Cell, Department of E
Thank You