The Hindu Business Line : Infrastructure: Panel to look into long-term funding

Viability gap-funding facility is meant to reduce capital cost of the projects by credit enhancement and to make them viable for private investments through supplementary grant funding.

Deep in thought: Mr P. Chidambaram, Union Finance Minister, flanked by Mr. R. Seshasayee, President, CII (right), and Mr Sunil Kant Mittal, Vice-President, at a meeting in the Capital on Wednesday. - Ramesh Sharma

New Delhi , Dec. 20

The Government has so far given in-principle approval to 17 proposals under the viability gap-funding (VGF) facility for public private partnership (PPP) projects.

The total cost of these 17 projects, located in Gujarat, Maharashtra, Madhya Pradesh and Rajasthan, amounted to Rs 3,970 crore and the VGF claim on these projects stood at Rs 795 crore, the Union Finance Minister, Mr P. Chidambaram, said here today.

Setting up Committee

Speaking at a national conference on private investment in infrastructure, organised by the Finance Ministry and the Confederation of Indian Industry, Mr Chidambaram also announced the setting up of a committee under Mr Deepak Parekh, HDFC Chairman, to go into various aspects of long-term financing of infrastructure projects, especially the PPPs.

This committee would be asked to submit its report in six weeks. The Finance Minister also promised more action on the infrastructure front in the run up to the Union Budget 2007-08. Besides these 17 projects, Mr Chidambaram said that there are 14 other proposals for VGF with some outstanding issues and these were being resolved. He also said that four more proposals were received recently.

Forex Reserves

The VGF facility is meant to reduce capital cost of the projects by credit enhancement and to make them viable and attractive for private investments through supplementary grant funding. The VGF can take various forms including, but not limited to capital grants, subordinated loans or interest subsidy.

Meanwhile, Mr Chidambaram said that he has asked the Finance Secretary to prepare a note on the issue of using forex reserves for financing infrastructure projects. He also underscored the need to create fiscal space to find resources for infrastructure development. "There is simply no room for wasteful expenditure or any high sounding programmes that appear attractive on paper, but do not deliver results," he added.

Development Objectives

Going by the current investment rate at 4 per cent of GDP, Mr Chidambaram felt that it might not be possible to achieve the target of finding and investing $320 billion in infrastructure development in the next five years. In this context, the Finance Minister noted that PPPs hold the key and that the private sector must rethink its approach in working with public sector.

"PPP is an attempt to marry skill sets of private sector with public interest. Nowhere is this marriage more important than creating infrastructure. Private sector must not only demonstrate its willingness to partner with public sector in providing public infrastructure, but also have appetite to invest on long-term basis in projects that have much longer gestation period," he said.

The Finance Minister said that the Government has approved 13 PPPs involving total investment of Rs 5,635 crore.

"Six proposals are under consideration and five are under advanced stage of preparation," he added.