As announced in the last budget on the monetisation plan, Finance Minister Nirmala Sitharaman has launched an ambitious medium-term National Monetisation Pipeline (NMP) to monetize Rs 6 trillion of brownfield infrastructure assets over a period of four years.
From 2022 to 2025, the government is planning to offer existing assets across sectors to private organisations to generate additional revenue, and at the same time to maintain and manage the assets in a professional manner. The top three sectors by value identified for asset monetisation include roads, railways, and power with a respective share of 27 percent, 25 percent, and 15 percent in the total assets value.
Among the projects the government has identified are 26,700 km of roads across 22 stretches, 400 railway stations, 90 passenger trains, 28,600 km of transmission lines, Bharatnet fibre network, and BSNL and MTNL towers. Other core infrastructure assets which will be leased out are public warehouses, civil aviation and port infrastructure, sports stadiums, and mining assets. With sufficient clarity on the number, size, and type of assets that would be made available in the market, the NMP will instil initial confidence among the investors.
The intended objectives of the asset monetisation plan are manifold — from recycling the proceeds for new infrastructure creation and reviving of credit flow in the sector, to bringing the private sector expertise for better operation and maintenance of assets. The government is relying on its experience with the sectors such as power and roads to carry out such a mammoth exercise.
In the power sector, five assets were monetised via PowerGrid InvIT raising around Rs 7,700 crore. Similarly, the road sector has already monetised 1,400 km of its highways projects worth Rs 1,700 crore. With the NMP, the government has given more legitimacy and force to such efforts and shown that the government means serious business.
A greenfield infrastructure project has higher risks involved than a brownfield project. Hence, by offering brownfield assets for monetisation, the government is inviting players such as pension funds and other institutional investors to participate in the infrastructure space.
Since the government is not envisaging any outright sale of land or assets, ownership of the assets will remain with the government as assets will be given to the private sector by way of leases or concessions. While the idea of asset monetisation seems quite promising, a few obstacles need to be cleared to achieve the intended benefits of the programme. Underlying structural and legacy issues continue to be a cause of concern for the success of the monetisation plan. For example, proper maintenance of asset register and title and encroachment may adversely affect the monetisation plan. Similarly, land unavailability, delayed approvals and clearances, policy constraints, and lack of co-ordination among stakeholders could hinder the project's progress.
Therefore, meticulous planning and co-ordination will be needed to address the underlying structural and legacy issues. Furthermore, proper structuring of the project and designing optimal commercial models and risk matrix will be crucial for attracting private investors, particularly pension funds which are generally risk-averse. It would be important for the government to get the first few projects in each sector right to set the ball rolling in the right direction.
Smooth implementation of the first Rs 10,000 crore will determine the fate of the Rs 6 trillion monetisation plan. Hence, achieving the first-year target of Rs 0.8 trillion is very important to build confidence in the market.
The success of the monetisation programme will be critical for the revival of the infrastructure investment in India, and will significantly contribute to India’s economic growth through its multiplier effect.
Abhaya Agarwal is Partner, Infrastructure Practice, EY India. Views are personal and do not represent the stand of this publication.