The quality of infrastructure will decide how sustainable India’s economic growth will be. And viability gap funding (VGF) will be a crucial policy and financing instrument that the Centre will be using to promote state level public private partnerships (PPP) in infrastructure, says a finance ministry report.

Since the scheme was initiated in January 2006, 18 projects have received “in principle” approval, while five proposals have been granted final approval with the completion of the bidding process. Adding up to a total cost of Rs 10,097.45 crore, with a sought VGF of Rs 2,571.97 crore, the 18 projects are concentrated in states like Rajasthan, Maharashtra and Gujarat.

Most of these proposals were granted “in principle approval” late last year, with some receiving approval even early this year. However, since it takes typically 15-18 months (from the granting of in-principle approval) for the offtake of money and 8-12 months for the bidding process, work on these projects is likely to begin only next year.

The five infrastructure projects where the bidding process has been completed are based in Madhya Pradesh. The total project cost amounts to Rs 1,017.24 crore, with a VGF of Rs 118.35 crore. The Joura-Nayagaon State Highway project, however, is now no longer under VGF as it was realised that it didn’t require this funding. The Madhya Pradesh Road Development Corporation Ltd (MPRDC) authorities said that the agreements for all four projects have been signed and construction work is underway. While the Mandsaur-Sitamau Road project is expected to take approximately 18 months to be completed, the estimated timeframe for the others is two years.

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