In recent years, there has been a significant surge in infrastructure development projects across India, and a major driver behind this momentum is the government’s Viability Gap Funding (VGF) scheme. This scheme, which offers up to 30 per cent capital expenditure support, has played a crucial role in catalyzing investment and driving growth in the infrastructure sector.
The VGF scheme was first introduced in 2006 by the Indian government with the aim of addressing the challenges faced by public-private partnerships (PPP) in infrastructure projects. It provides financial support to PPP projects that are economically viable but face difficulty in achieving financial closure due to high capital costs or low revenue generation.
One of the key benefits of the VGF scheme is that it reduces the financial burden on private players, making it more attractive for them to invest in infrastructure projects. This has resulted in a significant increase in the number of PPP projects being undertaken in various sectors such as roads, railways, ports, airports, and urban infrastructure.
The VGF scheme has also been successful in attracting foreign investment in India’s infrastructure sector. The government’s commitment to providing financial support and a stable policy framework has instilled confidence in international investors, making them more willing to participate in PPP projects in the country. This has not only brought in much-needed capital but has also helped in the transfer of technology and best practices from other countries.
Moreover, the VGF scheme has been instrumental in accelerating the pace of infrastructure development in India. By providing financial support, it has enabled the completion of projects that were stuck due to lack of funds. This has not only improved the overall infrastructure of the country but has also created job opportunities, boosting economic growth.
The VGF scheme has also been a game-changer in terms of the quality of infrastructure being developed in India. With the government’s focus on promoting sustainable and inclusive development, the VGF scheme has encouraged the use of modern technology and green practices in infrastructure projects. This has not only improved the quality of infrastructure but has also reduced the impact on the environment.
Another significant impact of the VGF scheme has been on the development of rural areas. The scheme has been instrumental in bridging the urban-rural divide by promoting the development of infrastructure in rural areas. This has not only improved the living standards of people in these areas but has also created new opportunities for economic growth.
It is worth noting that the success of the VGF scheme has not gone unnoticed. The World Bank has acknowledged the positive impact of the scheme and has commended the Indian government for its efforts in promoting infrastructure development through PPPs. The scheme has also been recognized as a best practice by international organizations such as the United Nations.
In conclusion, the government’s Viability Gap Funding scheme has been a major driver behind the surge in infrastructure development in India. It has provided the much-needed impetus to PPP projects, attracting private investment and accelerating the pace of development. With its positive impact on the economy, environment, and rural development, the VGF scheme has emerged as a model for infrastructure development not just in India but globally.
