India unveils a solid $80 billion National Monetisation Plan
Finance Minister Nirmala Sitharaman pulls a fresh bag of tricks to entice investment by targeting rail; road and power as the the three key sectors in the GoI’s latest initiative.
By offering up a list of brownfield assets into the spotlight India finance minister Nirmala Sitharaman launched the GoI’s National Monetisation Plan (NMP) into overdrive.
The value of this project will be a staggering $80.90 billion, with the ownership remaining with the government. The finance ministry has identified road; railways and power as the three key sectors for the purposes of asset monetisation. Gas pipelines are also being considered.
“It is important that India recognizes that the time has come for making the most out of our assets,” said Finance Minister Nirmala Sitharaman adding, "Asset monetisation, based on the philosophy of creation through monetisation, is aimed at tapping private sector investment for new infrastructure creation. This is necessary for creating employment opportunities, thereby enabling high economic growth and seamlessly integrating the rural and semi-urban areas for overall public welfare."
Sitharaman added that, "At this point, the list of assets that are coming, are all the central government's assets. We are not talking about states."
Niti Aayog’s Amitabh Kant pitched saying, “INR 1.5 lakh crore is the current annual outlay with the current year’s target being INR. 88,000 crore.” According to Kant added the policy is envisaged to serve as a medium-term roadmap for identifying potential monetisation-ready projects, across various infrastructure sectors. "Asset Monetisation needs to be viewed not just as a funding mechanism, but as an overall paradigm shift in infrastructure operations, augmentation and maintenance considering private sector's resource efficiencies and its ability to dynamically adapt to the evolving global and economic reality. New models like Infrastructure Investment Trusts and Real Estate Investment Trusts will enable not just financial and strategic investors but also common people to participate in this asset class thereby opening new avenues for investment. I hence consider the NMP document to be a critical step towards making India's infrastructure truly world-class," he added.
Land is not being sold away
Addressing queries on what brownfield assets were up for scrutiny Sitharaman said, “For those who have this question in mind -- are we selling away the lands? No. National Monetization Pipeline is talking about brownfield assets that need to be better monetised.” A brownfield investment is when a company or government entity purchases or leases existing production facilities to launch a new production activity. This is one strategy used in foreign direct investment (FDI).
A total of 15 railway stadiums; 25 airports and 160 coal mines were up for grabs as the GoI took stock of their brownfield assets. For Sitharaman the approach is simple, “By bringing in private participation, we are going to monetise it (assets) better and with whatever resource that you obtained by monetisation, you are able to put in for further investment into infrastructure building.
Focus on private sector for operation and maintenance
“The National Monetisation Pipeline talks about brownfield assets where investment is already being made, where there are assets either languishing or not fully monetised or under-utilised. The PSEs are ramping up Capex despite the second wave, I shall be monitoring this further,” she promised.
Endorsing the finance minister’s plan further Kant said, “We are fully committed to delivering success to the NMP. We feel that it is very important to bring in the private sector for better operation and maintenance, therefore we are committed to very strong delivery on the ground.”
Niti Aayog, Vice Chairman Dr. Rajiv Kumar was of the opinion that, “Infra growth will be private sector-led, it has a huge multiplier effect. There is no desperate sale of assets, but real valuation will be done. The government committee will involve private sector and private capital to develop infrastructure.”
He added that, "It will unlock the value of investments in brownfield public sector assets by tapping institutional and long-term patient capital, which can thereafter be leveraged for further public investments."He emphasised on the modality of such unlocking, which is anticipated to be by way of structured contractual partnership as against privatisation or slump sale of assets.
A four-year pipeline
The NMP comprises a four-year pipeline of the central government's brownfield infrastructure assets. Besides providing visibility to investors, NMP will also serve as a medium-term roadmap for the asset monetisation initiative of the government, the Niti Aayog said in a statement on Sunday.
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About 25 airports under the Airports Authority of India in tier 2 and 3 cities worth over 20,000 crore and ports assets worth Rs 12,800 crore and stadiums worth over Rs 11,500 crore are also likely to be part of the monetisation pipeline.
The maximum monetisation opportunities are expected to emanate by FY25 is expected from the road sector where Rs 1.6 lakh crore worth of national highways of NHAI are identified. This is followed by the railways sector where about 400 stations, about 150 trains, and some tracks and woodshed are identified worth Rs 1.5 lakh. The power sector will see some Rs 67,000 crore worth transmission lines from Power Grid and Rs 32,000 crore worth Hydro, Solar, and Wind projects from NHPC, NTPC, and Neyveli Lignite for monetisation.
The NMP comprises a four-year pipeline. It will also serve as a as a medium-term roadmap for the Asset Monetisation initiative of Centre, besides providing visibility to the investors. Sitharaman, it may be recalled, has put in a lot of focus on the Asset Monetisation as a means to raise innovative and alternative financing for infrastructure and included a number of key announcements.
India has set an ambitious target of becoming a $5-trillion economy and investing $1.4 trillion in the infrastructure sector by 2025. Both these facets are likely to throw up huge investment opportunities across the Indian economy.