Government of Gujarat announced a “Chiranjeevi Yojana” in April 2005. The objective of this scheme is to encourage private medical practitioners to provide maternity health services in remote areas which record the highest infant and maternal mortality and thereby improve the institutional delivery rate in Gujarat. The scheme was finally launched as a one year pilot project in December 2005 in five districts viz., Banaskantha, Dahod, Kutch, Panchmahal, and Sabarkantha. The private empanelled providers are reimbursed on capitation payment basis according to which they are reimbursed at a fixed rate for deliveries carried out by them. The payments are made for a batch of 100 deliveries. This is expected to take care of case-mix differences (i.e., normal or complicated deliveries) and help the providers to keep the costs below the reimbursed amounts. The scheme proposes to use a voucher system to target the people living below poverty line. The objective of this paper is to document the experience in implementing this scheme and discuss the issues in up-scaling it further.