With reference to lsquo Viability Gap Funding rsquo sometimes seen in the news which of the statemen...........

Economic Affairs Investment Models

With reference to ‘Viability Gap Funding’ sometimes seen in the news, which of the statement given below is/are correct?

1. It means a grant to support projects that are economically unjustified but are commercially viable.

2. In India viability gap funding is generally done by the Government to support the completion of infrastructure projects.

Select the correct answer using the code given below.

1 only

2 only

Both 1 and 2

Neither 1 nor 2

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Explanation:

‘Viability Gap Funding’ means a grant to support projects that are economically justified but not commercially viable. The main constraint in India’s infrastructure sector is the lack of source for finance. Some projects may not be financially viable though they are economically justified and necessary. This is the nature of several infrastructural projects which are long term and development oriented. For the successful completion of such projects, the government has designed Viability Gap Funding (VGF). The scheme is designed as a Plan Scheme to be administered by the Ministry of Finance and amount in the budget are made on a year-to- year basis. Such a grant under VGF is provided as a capital subsidy to attract the private sector players to participate in PPP projects that are otherwise financially unviable. Projects may not be commercially viable because of long gestation period and small revenue flows in future. The VGF scheme was launched in 2004 to support projects that come under Public Private Partnerships.

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