VGF Scheme for Offshore Wind Energy Projects

On June 19th, 2024, the Union Cabinet approved the Viability Gap Funding (VGF) scheme for offshore wind energy projects at a total outlay of Rs.7453 crore, including an outlay of Rs.6853 crore for installation and commissioning of 1 GW of offshore wind energy projects (500 MW each off the coast of Gujarat and Tamil Nadu), and grant of Rs.600 crore for upgradation of two ports to meet logistics requirements for offshore wind energy projects.

Key Points

The scheme is a major step towards implementation of the National Offshore Wind Energy Policy notified in 2015 with an aim to exploit the vast offshore wind energy potential that exists within the exclusive economic zone of India.
The VGF support from the Government will reduce the cost of power from offshore wind projects and make them viable for purchase by DISCOMs.
The projects will be established by private developers selected though a transparent bidding process; the power excavation infrastructure, including the offshore substations, will be constructed by Power Grid Corporation of India Ltd (PGCIL).
Ministry of New and Renewable Energy, as the nodal ministry, will coordinate with various Ministries/Departments to ensure successful implementation of the scheme.
Under the scheme, two ports in the country will be supported by Ministry of Ports, Shipping and Waterways to meet the requirements of offshore wind development.

Viability Gap Funding (VGF) Scheme

It aims at supporting infrastructure projects that are economically justified but fall marginally short of financial viability.
Support under this scheme is available only for infrastructure projects where private sector sponsors are selected through a process of competitive bidding.
The total VGF under the scheme does not exceed 20% of the total project cost, however, the Government may decide to provide additional grants up to a limit of a further 20%.