Andhra Pradesh plans to take the viability gap funding route to ramp-up road infrastructure under PPP mode

Considering the financial crisis that it is mired in and the dire need to ramp-up basic infrastructure like roads in the State, the Government of Andhra Pradesh is contemplating implementing the Central government scheme for Financial Support to Public Private Partnerships in Infrastructure (Viability Gap Funding Scheme).

The scheme provides financial support as grant, one time or deferred, to the economically desirable, but commercially unviable infrastructure projects undertaken through the PPP mode to make them commercially viable.

While insisting that the government should undertake public infrastructure projects to boost the State’s economy and generate revenue, Chief Minister N. Chandrababu Naidu, while releasing a White Paper on State finances in the Legislative Assembly on July 26, hinted at tapping the potential of the scheme despite financial hindrances.

Under the model, the government will provide viability gap to the contractor, while allowing collection of nominal toll from users like cars and heavy trucks. Two-wheelers, auto-rickshaws, agriculture tractors and other small vehicles are, however, exempt from toll.

Mr. Naidu observed that the Central government and NITI Aayog had been developing national highways across the country through this scheme. He explained that under the VGF scheme, the government would pay the difference of amount between the project cost and the collected user charges to the contractor.

“For instance, West Godavari district has black soil and, as a result, roads are getting damaged every year. Hence, we must think about laying concrete roads there. Nominal toll can be collected from cars, buses, lorries and heavy trucks. Thus, the State government can develop and maintain road network from village to mandal, and district headquarters. Similarly, airports, railway stations, ports and other infrastructure can be developed,” he observed.

Based on traffic, single lane, double lane, four lane, eight lane, and 16 lane roads could be developed, he said. “In the case of Delhi to Agra, the Central government is planning 16-lane roads,” Mr. Naidu said.