EXCLUSIVE | Budget 2022 likely to set target for asset monetisation

The assets up for monetisation include roads, railway stations, tracks, and power transmission lines.

The upcoming 2022-23 Union Budget may have asset monetisation as one of its key themes with a target, similar to goals set for divestment and tax and non-tax revenue.

The platform of asset monetisation will be the National Monetisation Pipeline (NMP), which estimates an aggregate potential of Rs 6 lakh crore from core assets over a four-year period.

“The NMP charts out a four-year plan for asset monetisation. From the upcoming Budget onwards, yearly targets will be set for monetisation,” a senior government official told Moneycontrol.

The current fiscal year’s asset monetisation target of Rs 80,000 crore was spelt out when the NMP was announced and not in a budget document. That is set to change from the next budget onwards.

The official said the Centre was still finalising a number for the FY23 asset monetisation target but added that it could be over Rs 1 lakh crore.

The NMP, unveiled by the government in September, aims to unlock value in brownfield projects by engaging private sector participants, transferring to them revenue rights while their ownership remains with the government.

This arrangement would make it similar to public-private partnerships. In an interaction with Moneycontrol, infrastructure expert Vinayak Chatterjee had termed the NMP as ‘PPP through the backdoor.’

Monetisation proceeds

Unlike privatisation or the stake sale of state-owned companies, the Central government will not get any funds from asset monetisation. Instead, public sector units and government agencies that own the assets will get the money.

The companies can then transfer part of the proceeds to the Centre through dividend payments and share buybacks. In the case of unlisted PSUs like the National Highways Authority of India (NHAI), Airports Authority of India (AAI), Bharat Sanchar Nigam (BSNL), the Centre will get the entire share buyback and dividend amounts.

“The first priority for the PSUs will be to use the proceeds from monetisation for their capital expenditure needs. What they can’t spend on capex, they will transfer to the Centre through share buybacks and dividend,” the official said.

This means that while there will be asset monetisation targets, what the Centre gets from them will be reflected in the non-tax revenue portion of the budget, specifically the entry titled ‘Dividends from Public Sector Enterprises and other investment.’

The Budget estimate for dividend from non-financial PSUs is Rs 50,027.81 crore for the current financial year (FY22). The revised estimate for FY21was Rs 34,717.25 crore compared with a budget estimate of Rs 65,746.96 crore.

If the asset monetisation drive goes through as planned, the dividend from non-financial PSUs could increase substantially from FY23 or FY24 onwards.

Transport infrastructure

At the launch of the NMP, Finance Minister Nirmala Sitharaman had said: “This entire pipeline 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.”

As per the NMP roadmap, over 66 percent of the assets to be monetised are from roads, railways and power. The remaining are from sectors including telecom, mining, aviation, ports, natural gas and petroleum product pipelines, warehouses and stadiums.

Assets up for monetisation include roads, railway stations, tracks, power transmission lines, hydroelectric and solar power assets, fibre assets, telecom towers, ports, warehouses, stadiums, government housing colonies and hotels.

In the road sector, the Centre has already monetised 1,400 km of national highways worth Rs 17,000 crore. A PowerGrid infrastructure investment trust has raised Rs 7,700 crore.