Centre to provide VGF for mega infrastructure projects

Chennai, Aug 3: Union Urban Development and Poverty Alleviation Minister S Jaipal Reddy today said the Centre would provide Viability Gap Fund (VGF) for mega infrastructure projects, including Metro Rail Projects.

Inaugurating ''Suminfra-2006--A Summit on Sustainable PPPs in Infrastructure'', organised by the CII here, he said the VGF, under the Jawaharlal Nehru National Urban Renewal Mission (JNNURM), was applicable to all infrastructure projects, which have a long gestation period.

''The Infrastructure projects per se are not commercially viable in short term. To address this risk factor of the investors, the Centre would provide 20 per cent of the total cost of the project by way of VGF'', he added.

Referring to Tamil Nadu Minister Poongothai Aladi Aruna's address that the State government proposes to implement the Metro Rail project to ease traffic congestion in Chennai, Mr Jaipal Reddy said the Centre would be too happy to provide the VGF for Chennai Metro Project as well.

''If we receive any proposal from Tamil Nadu, we will definitely provide the VGF'', he reiterated, in a brief chat with newspersons after the function.

The Centre was also prepared to sanction VGF to other Urban infrastructure projects under the JNNURM in cities like Chennai, Coimabtore and Madurai, he added.

Mr Jaipal Reddy said Metro Rail projects were taken up in Public Private Partnership (PPP) mode in Delhi and Bangalore through Special Purpose Vehicles. The Prime Minister had laid the foundation stone for the Mumbai Metro project recently and it would soon be launched in Hyderabad. These would be the models of PPPs, he added.

He said Indian states had to create an enabling environemnt and have legal regulatory framework to attract massive investments in infrastructure projects, which have a long gestation time and required long term investments.

While laying down the framework, the risk perception of the investors should also be addressed by providing a transparent model.

''The PPP will work in a non-controversial way only if we put in place a transparent framework and standard treatment. Whatever be the difficulties, there is no alternative other than PPPs'', he said.

Mr Jaipal Reddy said under the JNNURM, the Centre would provide Rs 50,000 crore in the next six years, towards the end of the 11th plan, with a view to motivating and enabling the state governments and Urban Local Bodies to raise a similar amount for investment in infrastructure.

This would mean that in six years investment would be about one lakh crore in this area, he added.

Exhorting the South Indian states to take advantage of their unique geographical features, Mr Jaipal Reddy said ''when the economy grows by eight to ten per cent, we will bump into humongous infrastructural bottlenecks and roads and ports will be jammed''. Keeping this in mind, ten ports were being taken up in PPP mode for development. ''Similar problems will come in airports also and four airports are under construction in PPP mode in Hyderabad, Bangalore, Mumbai and New Delhi. More airports would be taken up for development'', he added.

The states should learn the best practices from neighbouring states. ''It's not a question of ideology. It's a question of practicability. We cannot be bogged down in the morass of our own mindset'', he said and added that the Centre would learn the best practices from the states.

UNI