Renewable Energy – Wind, Tidal, Geothermal, etc.

[pib] Viability Gap Funding (VGF) Scheme for Offshore Wind Energy Projects


From UPSC perspective, the following things are important :

Prelims level: Viability Gap Funding (VGF) Scheme; Its features.


Why in the News?

  • The Union Cabinet, chaired by the PM, approved the Viability Gap Funding (VGF) scheme for offshore wind energy projects.

Note: Offshore wind energy projects refer to developing and operating wind farms located offshore, typically in coastal waters or oceans.

Back2Basics: Viability Gap Funding (VGF) Scheme

  • The VGF scheme is a financial tool to support infrastructure projects that are economically justified but face financial viability challenges.
  • It was launched in 2004 to address the gap between economically viable infrastructure projects and their financial feasibility under traditional financing models.
    • Administration: Administered by the Ministry of Finance, Government of India, the scheme operates as a Plan Scheme with annual budget allocations.


  1. Capital Subsidy: VGF provides a grant (capital subsidy) to infrastructure projects to make them financially attractive for private sector participation. This subsidy helps cover part of the cost that private investors would find economically unviable.
  2. Project Eligibility: Projects eligible for VGF are typically selected through competitive bidding processes. They must demonstrate economic justification but face challenges in attracting private investment solely on commercial terms.
  3. Disbursement Timing: The VGF grant is disbursed during the construction phase of the project. However, disbursement is conditional upon the private sector developer making the required equity contribution to the project.
  4. Budgetary Allocation: Funds for VGF are allocated from the government’s budget. Sometimes, contributions may also come from the statutory authority that owns the project asset.
  5. Limitations: Additional financial assistance beyond the VGF amount is capped at 20% of the total project cost. This additional support can be provided by the sponsoring Ministry, State Government, or the statutory entity involved.


  • Encouraging Investment: By reducing the financial risks associated with infrastructure projects, VGF encourages private sector participation, leading to faster project implementation and improved service delivery.
  • Infrastructure Development: The scheme supports the development of critical infrastructure such as transportation (roads, railways, airports), energy (power generation, transmission), and public utilities.

About VGF Scheme for Offshore Wind Energy Projects

    • The VGF scheme aligns with the National Offshore Wind Energy Policy (2015) to harness India’s offshore wind potential.
    • It aims to reduce power costs from offshore wind projects, making them viable for DISCOMs through government support.
    • It seeks installation and commissioning of 1 GW of offshore wind energy projects (500 MW each off the coast of Gujarat and Tamil Nadu).
  • Functionaries: 
    • Private Developers will execute projects via transparent bidding.
    • Power Grid Corporation of India Ltd (PGCIL) will build power evacuation infrastructure.
  • Total outlay: Rs. 7453 crore, including Rs. 6853 crore for installing and commissioning 1 GW of projects in Gujarat and Tamil Nadu.

Advantages of Offshore Wind Energy:

  • Offshore wind offers higher reliability, lower storage requirements, and greater employment potential than onshore wind and solar.
  • The development will attract investments, build indigenous manufacturing capabilities, and foster technology advancements.

Environmental and Economic implications:

  • 1 GW projects will generate 3.72 billion units annually, reducing CO2 emissions by 2.98 million tons per year for 25 years.
  • Expected to kickstart India’s offshore wind sector, supporting initial development of 37 GW capacity with an investment of Rs. 4,50,000 crore.
  • Creates an ecosystem for ocean-based economic activities, contributing to India’s energy transition goals.


[2018] With reference to solar power production in India, consider the following statements:

  1. India is the third largest in the world in the manufacture of silicon wafers used in photovoltaic units.
  2. The solar power tariffs are determined by the Solar Energy Corporation of India.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

[2016] Give an account of the current status and the targets to be achieved pertaining to renewable energy sources in the country. Discuss in brief the importance of National Programme on Light Emitting Diodes (LEDs).

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