Govt split on core fund use

The finance ministry has decided to allocate Rs 4,000 crore for a viability gap fund for infrastructure projects.

However, given the guidelines for the funding of infrastructure projects, there is a dispute over whether the entire corpus should be housed in the ministry.

The guidelines specify that only projects in which the implementing agency has at least 40 per cent private ownership will be eligible for funding through the corpus.

The Planning Commission has argued that this will mean that the funding will be applicable only to build-own-operate-transfer (BOOT) projects and will leave out build-operate-transfer (BOT) projects, which are prevalent in the road and railway segments.

"Projects in the road and railway sectors, for instance, are such that ownership cannot be given to private sector firms. They can only be given a contract to construct or maintain the project. The guidelines, therefore, will exclude projects in sectors where BOT is the norm," said a government official.

Therefore, it has said that rather than housing the entire corpus with the finance ministry, a part of it should be hived off and included in the annual Plan allocations for the ministries of surface transport and highways, railways and urban development, where private ownership is not possible.

The finance ministry is reportedly in favour of retaining the entire viability gap fund. The draft guidelines it had prepared specifies that projects requiring a viability gap funding of up to Rs 50 crore will be cleared by an empowered committee of government officials, while projects that need more funds will have to be approved by the finance minister.