With a greater thrust on public-private partnership (PPP) projects to boost infrastructure creation, the Centre will soon extend Viability Gap Funding (VGF) and India Infrastructure Project Development Fund (IIPDF) schemes till FY31. The extension will come with a few changes to both schemes, which play a key role in public-private partnership (PPP) projects.
Under the VGF Scheme, funding for most sectors would be retained at the existing level, but there could be some moderation in funding for social-sector PPPs. PPPs in the social sector, such as hospitals and facilities in educational institutions, were taken up on a pilot basis with up to 80% VGF, which was considered very high compared with other sectors.
“The social-sector VGF is too high. Hence, the VGF may be lowered a bit so that it does not look like an EPC (Engineering, Procurement and Construction) project, where governments fund the projects almost fully,” an official said.
Under the VGF scheme, economic-sector projects may receive up to 40% of their capex as a VGF grant, with 20% contributed by the Centre and 20% by the states. The VGF Scheme provides higher levels of support for social sectors, including health, education, water supply, wastewater treatment and solid waste management. Social-sector projects in health and education may receive up to 80% of capex (in a 40:40 ratio between the Centre and states) and up to 50% of opex (25:25) for five years after the commercial operation date as a VGF grant.
Infrastructure projects may not always be commercially viable due to long gestation periods and limited financial returns. To overcome these challenges, VGF is provided.
Overall, to date, 67 projects with a total project cost of Rs 45,802 crore have received final approval under the VGF Scheme, with VGF of Rs 7,682 crore approved and disbursal of Rs 4,847 crore already completed.
Meanwhile, the government plans to extend more assistance to states under the IIPDF Scheme to prepare a pipeline of PPP projects for execution. In addition to the assistance the Centre provides to states for expenses incurred on transaction advisers or consultants, it will also offer the option of providing full support for Project Management Units (PMUs) in states that seek such assistance, sources said.
The Department of Economic Affairs (DEA) has identified the IIPDF Scheme as a mechanism through which project sponsoring authorities can source funding to cover PPP transaction costs, thereby reducing the impact of costs related to procuring transaction advisers on their budgets.
In January 2026, the Centre launched a PPP project pipeline for FY26–28, covering 852 projects across central ministries and states, with a combined infrastructure investment exceeding Rs 17 lakh crore. The comprehensive pipeline consolidates planned initiatives across key sectors, including transport, energy, water resources and urban infrastructure, reflecting a sustained policy push to leverage private capital and expertise to accelerate India’s growth agenda.