Question

Q. Which of the following statements is/are correct about the “Viability Gap Funding” in the context of the Indian economy?

• A.
  1 only
• B.
  2 only
• C.
  Both 1 and 2
• D.
  Neither 1 nor 2

Answer 1

The correct option is D

Neither 1 nor 2
Explanation:

Statement 1 is incorrect: In developing countries like in India, there will be infrastructure projects which are economically justified but fall short of financial viability. This means that the projects can not generate income due to the long gestation periods of the projects and the inability to increase user charges to commercial levels. But they create huge economic benefits in terms of human capital such as health, education, freedom etc.
For example, An airline service from New Delhi to towns of Northeastern states. This may cause the airline service financial loss such as huge expenses and low profits. But it will provide access to the Capital for backward regions of the nation.
For these kinds of projects, Viability gap funding will be provided by the Government.

Statement 2 is incorrect: Under the Viability Gap Funding programme, the Government will provide the lowest bid for capital subsidy, but subject to a maximum of 20$\%$ of the total project cost and in case of further assistance a further 20% of the total project cost will be funded.