Updated: August 24, 2021 7:37:05 am
THE GOVERNMENT Monday unveiled a four-year National Monetisation Pipeline (NMP) worth Rs 6 lakh crore to unlock value in brownfield projects by engaging the private sector, transferring to them the rights but not the ownership in projects; and using the funds for infrastructure creation across the country.
Roads, railways and power sector assets will comprise over 66 per cent of the total estimated value of the assets to be monetised, with the balance coming from sectors including telecom, mining, aviation, ports, natural gas and petroleum product pipelines, warehouses and stadiums.
Finance Minister Nirmala Sitharaman said monetisation will create further value for infrastructure creation in the country and explore innovative ways of private participation without transfer of government ownership. “There is no land here, this entire (NMP) is talking about brownfield projects where investments have already been made, where there is a completed asset which is either languishing or it is not fully monetised or is under-utilised. So by bringing in private participation in this, you will be able to monetise it better and ensure further investment in infrastructure building,” she said.
“The ownership of the assets remain with the Government (and) there should be mandatory handback,” the Finance Minister highlighted.
Among the key challenges that may affect the NMP roadmap are lack of identifiable revenue streams in various assets, level of capacity utilisation in gas and petroleum pipeline networks, dispute resolution mechanism, regulated tariffs in power sector assets, and low interest among investors in national highways below four lanes, according to the NMP framework. Analysts also point to issues such as the lack of independent sectoral regulators as potential impediments.
Real estate investment trusts (REITs) and infrastructure investment trusts (InvITs), for instance, are structures being used to monetise assets in the roads and power sectors. Sitharaman said the government has been taking decisions for revival of the economy and this initiative will help create sustainable demand. “To make sure the economy gets necessary support from the government, we identified infrastructure as being the central pillar, through which if public expenditure happens, the revival will be clearly predictable and spillover effect itself will create a cycle of demand,” she said.
Among the assets on the NMP list include: 26,700 km of roads, railway stations, train operations and tracks, 28,608 CKT km worth of power transmission lines, 6 GW of hydroelectric and solar power assets, 2.86 lakh of km fibre assets and 14,917 towers in the telecom sector, 8,154 km of natural gas pipelines and 3,930 km of petroleum product pipelines.
Obstacles known, resolving is key
Monetisation of assets is not new, but the government has finally organised it in baskets, set targets, identified impediments, and put in place a framework. While unlocking assets worth Rs 6 lakh crore is an ambitious plan, resolving the impediments is expected to bring investors.
Apart from roads and power projects, 15 railway stadiums, 25 airports and the stake of the Central government in existing airports and 160 coal mining projects, 31 projects in nine major ports, 210 lakh MT of warehousing assets are among those which will be up for monetisation.
Government think tank NITI Aayog, in coordination with the Finance ministry, has created the NMP dashboard and the detailed roadmap through a series of discussions with stakeholders, global investors and state governments. “This monetisation pipeline is coming at a time when states are all more keen to move forward (on this),” Sitharaman said, pointing out that the Central government will provide financial support to states pursuing disinvestment and listing of state entities.
NITI Aayog CEO Amitabh Kant said the government will closely monitor the NMP progress, with yearly targets and a monthly review by an empowered committee chaired by the Cabinet Secretary. NITI Aayog has a Public Private Partnership Cell and has engaged transaction advisors to handhold any ministry for any support it needs in pursuing the monetisation roadmap, he said.
Kant said the government expects this plan to be a success since it comprises only brownfield assets that have been “de-risked” and the Aayog’s discussions with key global investors have revealed that they are keen to participate in projects to be monetised through a transparent/competitive bidding process. Contractual partners will have to adhere to Key Performance Indicators and Performance Standards.
The NMP will run co-terminus with the National Infrastructure Pipeline of Rs 100 lakh crore announced in December 2019. The estimated amount to be raised through monetisation is around 14 per cent of the proposed outlay for Centre of Rs 43 lakh crore under NIP.
NITI Aayog Vice Chairman Rajiv Kumar said infrastructure growth in India will be private sector-led and “this is the next step in mobilising private capital” without transferring ownership to private corporations or resorting to fire sale of assets.
The top five sectors in terms of value capture around 83 per cent of the aggregate pipeline value, with roads covering 27 per cent, followed by railways 25 per cent, power 15 per cent, oil & gas pipelines 8 per cent and telecom 6 per cent. In terms of annual phasing by value, 15 per cent of assets with an indicative value of Rs 88,000 crore are envisaged to be rolled out in the current financial year.
“This includes selection of de-risked and brownfield assets with stable revenue generation profile with the overall transaction structured around revenue rights. The primary ownership of the assets under these structures, hence, continues to be with the Government with the framework envisaging hand back of assets to the public authority at the end of transaction life,” the government said.
To encourage states to pursue monetisation, the Central government has already set aside Rs 5,000 crore as incentive. If a state government divests its stake in a public sector undertaking, the Centre will provide a 100 per cent matching value of the divestment to the state. Similarly, if a state lists a public sector undertaking in the stock markets, the Central government will give it 50 per cent of that amount raised through listing. Finally, if a state monetises an asset, it will receive 33 of the amount raised from monetisation from the Centre.
The government has announced plans for NMP in this year’s Budget and earlier in August, Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey had said that the government is finalising Rs 6 lakh crore worth infrastructure assets for monetisation.
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