Viability Gap Funding

Why is in news? No plans to provide Viability Gap Funding for Pumped Storage Projects; levelized cost of storage is viable: Union Power and New & Renewable Energy Minister

The Union Minister for Power and New & Renewable Energy has informed that the levelised cost of storage of Pumped Storage Projects is economically viable. Therefore, there are no plans to provide Viability Gap Funding for Pumped Storage Projects.

Ministry of Power has notified Guidelines to promote development of Pumped Storage Projects (PSP) in the country on 10thApril, 2023.

There is no provision for allocation of PSPs to the private sector on nomination basis in the aforesaid guidelines.

At present, no proposal for allocation of PSPs to private sector on nomination basis is under consideration.

About VGF:

Viability Gap Finance provides grants to support projects that are economically justified but are also financially weak.

It is designed as a Plan Scheme that is implemented by the Ministry of Finance and the amount for which is made in the budget on a year-to-year basis.

It is provided as a capital subsidy to attract the private sector players to participate in PPP projects that are otherwise financially unviable due to long gestation periods and small revenue flows in the future.

Public-Private Partnerships (PPPs) involve collaboration between a government agency and a private-sector company that can be used to finance, build, and operate projects, such as public transportation networks, parks, and convention centers.

The Viability Gap Funding (VGF) provided for economic infrastructure will be extended to social infrastructure.

Infrastructure projects also involve externalities that are not adequately captured in direct financial returns to the project sponsor.