Viability Gap Funding (VGF)

Viability Gap Funding (VGF)

The government has introduced Viability Gap Funding (VGF) to promote implementation of more economically justifiable but financially unviable infrastructure projects. The lack of financial viability usually arises from long gestation periods, unattractive future cash flows and the inability to increase commercial charges from the users. VGF administered by the Ministry of Finance, means a grant or financial aid to support such projects under Public Private Partnership model (PPP). A grant under VGF is provided as a capital subsidy by the Central Government, as a percentage, usually up to 20%, of the total capital cost of the infrastructure projects.