Dipam Secy On Government'S Big Bet On Infra Asset Monetisation, Divestment -

Dipam Secy On Government’S Big Bet On Infra Asset Monetisation, Divestment

As promised in this year’s Budget speech, Finance Minister Nirmala Sitharaman launched the much anticipated National Monetisation Pipeline (NMP) on 23rd August 2021. The NMP aims to unlock the potential of public sector assets, mostly in the infrastructure space, to mop up an aggregate Rs 6 lakh crores in the next four years by leasing them out to private players.

The plan mainly includes monetisation of existing brownfield assets. Infrastructure assets cutting across roads, ports, railways, airports, telecom, and power have been identified. The ownership of these assets will remain with the government and they will only be leased out to the private sector.

For the country’s top private infrastructure companies, this is a great opportunity to consolidate the nation’s infrastructure gains and to help boost the economy. It is being projected as a win-win as the government gets to lease the under-utilised brownfield projects and earn revenue from it.

But with opportunities, come challenges too. Can the NMP deliver the desired outcomes? Will the private sector have the appetite for these assets?

The monetisation pipeline aside, the government has also broken a 19-year-old privatisation jinx with the sale of Air India to the Tatas. It was the first sale of a public sector unit since the sale of Indian Petrochemicals Corporation Ltd (IPCL) in 2002.

On the Air India divestment, Tuhin Kanta Pandey, Secretary of the Department of Investment and Public Asset Management (DIPAM) said, “The Air India disinvestment has been an extremely complicated one. One of reasons is that a huge amount of public funds, taxpayers funds, have gone into supporting Air India over the years in their turnaround plan and financial restructuring plan (FRP) which was sanctioned. This divestment brings that much-needed boost to the sector that has been affected by COVID. This private management will actually infuse a lot of funds in the airlines, add more assets, restructure the business of Air India. I would say that it is a win-win situation for both taxpayers, employees and other stakeholders.”

Air India’s share purchase agreement will be signed on Monday, he added.

The next big one on the government’s list is BPCL, which is likely to be the biggest sale of a PSU ever in terms of deal size.

On BPCL, the DIPAM Secretary said that soon after the BPCL divestment EOI, India was hit by the pandemic.

“The due diligence process is on. This is a very, very large transaction and obviously, this also has upstream, downstream, and so many other units. It is a very large disinvestment, and obviously, the bidders would have to do proper due diligence before they are ready for the financial bids. As soon as we are finished with the due diligence process, will come the RFP and financial bid, which are actually not very big things. The main thing is the due diligence process.”

In its second term, the Modi government decided to take the privatisation plunge, declaring that government will remain only in four sectors considered strategic. Privatisation will be the course for all other non-strategic sectors.

On  the LIC IPO plan, Pandey said, “We really hope to do it in the last quarter. As I have said before, we are working very hard on it. This has been again one of the very complicated ones, as complicated I would say as Air India, but on a different platform. This is an IPO and we need to actually prepare the company in terms of SEBI requirements, and also (bring out) the embedded value which is critical in this case, being an insurance company. All of that work is in progress and advisors are in place. I think, all of the activities are going on, and very soon we will have the DRHP filed with SEBI, and thereafter we will be moving towards the launch of this IPO.”

For full interview, watch accompanying video…

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