State plans exclusive viability gap fund fund with Rs 500 crore corpus.
The Karnataka government is planning to establish a dedicated Karnataka Viability Gap Fund (KVGF) with a corpus of Rs 500 crore to provide financial support for public-private partnership (PPP) projects approved by the Infrastructure Authority, which is also being set up, a senior state government official said.
“The government of Karnataka is facing several challenges in arranging funds to execute various PPP projects. In order to help implement these projects we have proposed to set up a fund with a corpus of Rs 500 crore in the proposed Karnataka Infrastructure Development and Regulation Bill 2011, which is being tabled in the winter session of the state assembly next month,” Raj Kumar Khatri, secretary to government, infrastructure development department, government of Karnataka, said.
The state government will remit an amount of at least Rs 100 crore every year from the Infrastructure Initiative Fund or the state budget into the KVGF. The KVGF will be administered and managed by the proposed Infrastructure Authority as prescribed in the draft infrastructure development and regulation bill, Khatri told Business Standard.
The Viability Gap Funding Scheme provides financial support in the form of grants, one time or deferred, to infrastructure projects undertaken through publicprivate partnerships with a view to make them commercially viable. The Central government has established a Viability Gap Fund to aid the PPP infrastructure projects, which face the viability gap due to inherent nature of the project.
The government may also remit the success fee recovered from the developers, specified payments, if any, provided under the concession agreement or any other tax, cess among others that may be levied for the purpose of infrastructure development into the proposed KVGF.
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The proposed infrastructure authority will utilise the funds from KVGF to meet the administrative and other expenses of the authority including the PPP unit. It may also use the funds to make payment to consultants, advisors among others for carrying out the services assigned to them by the Infrastructure Authority.
“The state government may utilise the KVGF as an incentive to private sector developers taking up PPP projects in the state. Presently, there is no such fund in Karnataka and if the proposed bill is passed in the coming session, the state would emulate its neighbouring state of Andhra Pradesh,” a government official said.
Khatri said the infrastructure development department and infrastructure development corporation (Karnataka) Limited have been holding interactive sessions with the captains of industry to elicit their views and opinions on the draft Karnataka infrastructure development and regulation bill. “Once we gather their views we will put up the draft bill for approval in both the houses of the state legislative assembly during the forthcoming winter session,” he added.