The writer takes us through the National Monetisation Pipeline and sector-wise allocations
The government has set up a target to make India a $5 trillion economy. To achieve this goal, it is targeting to unlock optimal value from public sector assets which have not yielded potential return or which are sub-optimally utilised, by the way of ‘asset monetisation’. It has set an aggressive target of raising around ₹6 lakh crore under the National Monetization Pipeline (NMP). The National Infrastructure Pipeline (NIP) envisages infrastructure investment of ₹111 lakh crore over a five-year period between FY 2020 and FY 2025.
With an annual average investment of ₹22 lakh crore, this is a significant step-up (~2.5 times) vis-à-vis historical levels of spending on infrastructure. Investment in infrastructure is directly proportional to the growth in GDP/ economy of a country. It will also lead to a multiplier effect on the local economy to boost retail, real estate, tourism and generate employment opportunities and also unlock public sector potential, tapping private sector efficiencies through Public-Private Partnership (PPP) and create critical sources of revenue.
Under the National Asset Monetisation Policy, the assets are divided into two categories: core and non-core assets. Core assets include sports assets such as stadiums, highway operational toll roads, power transmission assets, oil and gas pipelines, airports, telecom assets, warehousing assets. Non-core assets comprise land, office space, factories, commercial spaces, properties belonging to the railways, defence and a number of PSUs.
These include the top five sectors such as roads (27%) followed by railways (25%), power (15%), oil and gas pipelines (8%) and telecom (6%). Roads and Railways together contribute ~52% of the total NMP value. Niti Aayog has also created a dashboard for tracking progress and for providing visibility to investors.
The government is also targeting several REITs/InvITs to monetise State and PSU assets and this change will enable them to attract investments from a wider market of retail investors.
The Ministry of Railways: It targets raising ₹1,52,495 crore through asset monetisation with plans to award 90 passenger trains and 400 stations to private players (Tier 1: 50 stations, Tier 2: 100 stations, and Tier 3: 250 stations), 256 goods sheds, 673 km Dedicated Freight Corridor, 630 Hill railways, 7281km Konkan Railway and 18,700 OHE Invit during the year. It aims to increase the modal share (freight) of railways from 26% to 45% while continuing to provide best-in-class services for passengers. Rail Land Development Authority (RLDA) and Indian Railway Station Development Corporation(IRSDC) have four key mandates as a part of its development plan — leasing of 84+ commercial sites, 2250 railway colony redevelopment, 60+ railway station redevelopment and building multi-functional complexes. The NIP envisages a total capex of ₹13.7 lakh crore by both the centre and states over FY 2022-25, of which ₹1.6 lakh crore is envisaged through the PPP mode.
The Ministry of Road Transport and Highways (MoRTH): It has set a target of raising ₹1,60,200 crore through asset monetisation. It plans to monetise 1,32,499 kms of roads through Infrastructure Investment Trust (InviT), Toll-Operate-Transfer (TOT) and securitisation. NHAI is in the process of monetising its completed and operational highway projects under the Infrastructure Investment Trust route to mobilise additional financial resources through the capital markets. Selected operational portfolio of projects will be held through an SPV. The indicative value of the NHAI InvIT fund raise from the current tranche underway is about ₹5,000 crore. The first tranche of InvIT is expected to consist of ~586 km of NH assets in Rajasthan, Gujarat, West Bengal, and Bihar.
The Department of Telecommunications: It has a target of raising ₹35,100 crore for which it has already undertaken the monetisation of tower assets of BSNL and BharatNet. About 2,86,255 km of existing fibre assets of BBNL and BSNL, laid under the Bharatnet project spanning over 16 states have been considered for monetisation through PPP mode. Rent Operate Transfer(ROT) and Develop, Build, Finance, Operate and Maintain (DBFOT) model has been adopted for monetising assets under the telecom sector. The Department of Investment and Public Asset Management (DIPAM) has started the process of selling non-core assets of HMT Ltd and MTNL Ltd. Under Union Budget 2021-22, the government allocated ₹14,200 crore for telecom infrastructure that entails completion of optical fibre cable (OFC) based network for Defence services, rolling out broadband in 2.2 lakh panchayats, improving mobile services in the North East and an additional outlay of funds to expand the reach of broadbands in rural areas through PPP model and boost Digital India initiative.
Ministry of Youth Affairs and Sports: With a ₹11,450 crore target, it plans to monetise over 130 state-owned stadiums in the country including about 50 cricket stadiums and 2 Sports authority Regional centres. The stadiums are likely to be leased out to the private sector by way of an operation and maintenance contract, OMDA based PPP model or through InViTs. The ministry has already floated a tender for Jawaharlal Nehru Stadium. The government to build world class sports infrastructure through brownfield PPP projects.
Ministry of Civil Aviation: As for the sale of assets under the Ministry in 2021-22 has set a target of raising ₹20782 crore, the government is considering selling the Airports Authority of India’s (AAI) stake in the joint venture of Delhi, Mumbai, Bangalore and Hyderabad airports. This is besides the 25 AAI airports that it will monetise through the OMDA based model (Operation, Management, Development Agreement). AAI has identified 6 airports in Tier 2/Tier 3 cities namely, Amritsar, Varanasi, Bhubaneswar, Indore, Raipur and Trichy for the purpose of monetisation through brownfield PPP models. The AAI has announced a few developments in Indian Airports—construction of a new airport on a greenfield site in Hollongi (Arunachal Pradesh) by November 2022 and a new integrated passenger terminal building expansion of Tiruchirappalli and Pune Airport (March 2022). The Airport Authority of India (AAI) signed a concession agreement with Adani Group for three airports—Jaipur, Guwahati and Thiruvananthapuram.
Ministry of Shipping Ports and Waterways (MoSPW): It has set a target of raising ₹12,828 crore has identified over 31 berths that it plans to monetise through the PPP mode which consists of Paradip port, Shyama Prasad Mukherji Port (Kidderpore and Haldia), JNPT port, Mumbai port and many more. Jawaharlal Nehru Port Trust launched a comprehensive solid waste management project as a part of its green port initiatives. Land Monetisation is one of the oldest sources of revenue besides its core operations. MoSPW leases some part of the land for commercial developments and some part of land for township development.
Ministry of Power: With a ₹39,832 crore targeted investment, it aims to monetise assets of Powergrid for more than ₹7000 crore in the first phase. These assets, which are mainly High Voltage Transmission lines and substations, are held by Powergrid in the form of Special Purpose Vehicles (SPVs). Key entities whose assets have been considered are NHPC, NTPC and SJVNL who own the bulk of the hydel assets and NTPC (under Ministry of Power) and NLC (under Ministry of Coal) that own renewable assets. The proceeds from the asset monetization would be deployed by Powergrid in their new and under-construction projects. The government plans to monetise the assets of state-owned power companies like NTPC and REC through the InvIt model, and half the proceeds may go into strengthening state transmission and distribution infrastructure. Asset recycling is a key strategy of the Government of India to release the capital invested in operational assets and the proposed InvIT of Powergrid would attract both domestic as well as global investors including sovereign wealth funds. The government had approved liquidity support packages involving one-time loans of about ₹1,30,000 crore from Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to discoms, to clear their overdue payments
Ministry of Petroleum and Natural Gas: It has identified non-core assets worth ₹24,462 crore for monetisation which includes assets from Indian Oil Corporation (IOC), Gas Authority of India Ltd (GAIL) and Hindustan Petroleum Corporation Ltd (HPCL) through the InvIt route. The government is looking to monetise operating infrastructure assets, to finance new infrastructure development. Some of the assets include 2 hydrogen-generating units in Gujarat and some ESG assets like effluent treatment plants, sulphur recovery units, water treatments plants etc., from IOC, worth about ₹10,000 crore. The Dhabhol-Bengaluru pipeline(1414km), Dahej-Uran-Panvel-Dabhol (815km) pipeline worth ₹5,000 crore from GAIL and HPCL’s product pipeline from Mangalore-Hassan worth ₹2,500 crore and more assets are being identified. This will help GAIL to mobilise over ₹20,000 crore through this route that could be helpful in developing new pipeline infrastructure.
Apart from the above mentioned assets the government is planning to raise ₹28,747 crore from Mining, ₹28,900 crore from warehousing and investments worth ₹15,000 crore in urban real estate.
Factors to consider
There is no need to outrightly sell assets for monetisation. There are several viable commercial models to facilitate this objective through adequate upfront premiums, regular revenue shares, standard service delivery parameters with defined penalties and termination clauses in the contract. Asset monetization can be taken up through two methods classified as Direct Contractual Approach which mean direct contract between public and private partner or the PPP model which consists of OMDA (Operation Management Development Agreement) and ToT( Toll Operate Transfer) and other method is Structured Financing Models which consists of investment in InvITs, Real Estate Investment Trust (REIT) and Asset-Backed Securitisation (ABS). Adoption of any model would depend upon various factors viz. asset profile, objectives for monetisation, expectations of sponsor and investors etc. The most optimal or selected model, could hence very well be one of the above or a hybrid structure. It just needs to be structured correctly to achieve a win-win scenario for all: the government, the investor and the public.
With asset monetization, the revenue proceeds can be reinvested in new infrastructure without resorting to public debt while better maintaining the existing infrastructure facility. It also leads to a comprehensive modernization drive with innovative techniques and ideas replacing the obsolete ones. But this is a sensitive decision-making process that needs to consider the correct valuation of the assets, the future infrastructure needs of the country and the private sector’s ability to fulfil the targeted objective. Equally important is the willingness of the citizens to accept management of public infrastructure in private hands. Their grievances, if any, need to be promptly answered by the operating private player.
The writer is Head — Strategic Consulting and Valuation Advisory, JLL India