Govt drafts policy on financial assistance for PPP projects

The government has prepared a draft policy on financial assistance for Public-Private Partnership (PPP) projects, aiming to attract private investments in such projects, officials said.
"A draft policy styled Guidelines for Viability Gap Funding (VGF) for PPP projects, 2018 has been formulated," a senior finance ministry official told the FE.
The guidelines will take effect immediately after its publication in the official gazette, he added.
According to the draft policy, maximum 40 per cent of the total estimated capital cost will be provided as capital grant in the form of VGF, a PPP official said.
Besides, maximum 40 per cent of the total estimated project cost will be provided as annuity in the form of VGF, he added.
The VGF limit is now maximum 30 per cent under the existing guideline, he also mentioned.
The draft guidelines had been sent to the authorities concerned for taking their opinions on the draft policy. A good number of the authorities gave their opinions in this regard. The draft will be finalised in the current month after changing some provisions in the light of opinions received from the authorities concerned, a high official of the finance ministry said.
The government has enacted the Public-Private Partnership Act-2015 to provide legal framework for creation of PPPs by involving the private sector participation along with the public sector and attracting local and foreign investments in different sectors as well as other service delivery, according to the draft guidelines.
In line with Section 16 of the PPP Act, which permits the government to provide financing to PPP projects, the government has decided to subsidise economically viable PPP projects that may not be financially viable.
The government will make such projects financially viable as per a budget line. This budget line would be known as the VGP.
The objectives of the VGF are to make the commercially non-viable infrastructure projects attractive to private investors through PPP arrangements, to minimise the cost or maximise the value for money (VFM) of infrastructure projects to the government and to undertake the projects more effectively under the close supervision of the government, the draft guidelines read.
VGF will be applicable to only PPP projects including the projects being taken up under the rules for national priority projects and policy for implementing these projects through government-to-government (G2G) arrangement 2018, a high official of the finance ministry said.
The PPP unit under the Finance Division will review the VGF proposal for eligibility. It will complete the review process within 15 working days since the receipt of the VGF proposal.
A seven-member VGF appraisal committee will meet within 15 working days after reviewing the VGF form by the PPP unit.
"We have prepared VGF guidelines on PPP projects, 2012 according to the policy and strategy for PPP 2010. The government has already formulated PPP act, 2015. For this, new draft guidelines have been prepared in light with PPP act 2015," a finance ministry official who is dealing with the issue told the FE.
Currently, a total of 47 projects are being implemented by various sectors including railway, telecommunication and power under the PPP in the country. Of the projects, two projects had been implemented in over seven years since its inception that were under the health ministry, according to sources concerned.

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