After the road and transport sector, it is the turn of power projects to receive viability gap funding (VGF).
The Union Ministry of Power and Central Electricity Authority (CEA) are preparing policy guidelines to invite bids for power projects in the north-eastern states.
“We have selected a project in Mizoram and are working on its modalities. Once this project is successful, we will promote more projects in the north-eastern states through VGF route,” said H S Brahma, secretary, ministry of power.
VGF means a one-time, or deferred, grant for economically unviable, but socially desirable infrastructure projects that may have long gestation periods and limited financial returns.
The government introduced VGF in the 2005 Budget with the then finance minister allocating Rs 1,500 crore to make the big infrastructure projects viable for the private sector players.
In the last four years, roads and highway projects have gained pace because of VGF, but the power ministry could not attract private investment for unviable projects due to lack of substantial policy framework.
While in the 11th Plan (2007-2012), India has a target of adding 78,700 mw of electricity generation capacity, in the 12th Plan the country plans to add over 1,00,000 mw of capacity.
Since the government is targeting at least 50% capacity addition from the private sector in the 12th Plan and many projects have to be awarded keeping in mind the regional-social obligations rather than financial viability, the government is firming up its policy framework to promote VGF projects.
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