National Monetization Pipeline: Highlights Of The Road To Six Lakh Crore


By: Ashish Ranjan ashishranjanart@gmail.com
By: Ashish Ranjan
ashishranjanart@gmail.com

Worth Noting:

  • This four-year pipeline of the Central Government’s brownfield infrastructure assets will serve as a medium-term roadmap for the Asset Monetization initiative of the government, apart from providing visibility for the investors.
  • Amitabh Kant, CEO of Niti Aayog, made it clear during the launch of the pipeline that the ownership of the assets remains with the government and the private sector parties will have to follow a mandatory hand back after the completion of the period which is FY 2022 to FY 2025. It has also been made clear that no land parcels will be taken up under the NMP and it will apply only on brownfield assets in which investments have already been made but the assets are under-utilised, unutilized or not properly monetized.
  • The assets and transactions identified under the NMP are expected to be rolled out through a range of instruments, which include direct contractual instruments such as public private partnership concessions and capital market instruments such as Infrastructure Investment Trusts (InvIT) among others.

With a vision to boost the infrastructure in various sector, the Union Government earlier came with the idea of National Infrastructure Pipeline. The execution of projects planned under NIP requires huge capital expenditure and the government planned to achieve this specific target in three ways: Firstly, by creating the institutional structures; secondly, by a big thrust on monetising assets, and thirdly by enhancing the share of capital expenditure in central and state budgets.

In the light of this vision, finance minister Nirmala Sitharaman, on August 23, 2021, announced the launch of ‘National Monetization Pipeline’ which targets to raise a whopping 6,00,000 Crore by monetising assets from thirteen different sectors over a four-year period.

Apart from the NIP, this monetisation scheme is also in line with strategic divestment policy, under which the government will retain presence in only a few identified areas with the rest tapping the private sector. NMP aims to unlock value in brownfield projects by engaging the private sector, transferring to them revenue rights and not ownership in the projects, and using the funds generated for infrastructure creation across the country.

As per the government, asset monetization based on the philosophy of Creation through Monetization, is aimed at tapping private sector investment for new infrastructure creation. The Union finance minister has stated that it is necessary for creating employment opportunities, thereby enabling high economic growth and seamlessly integrating the rural and semi-urban areas for overall public welfare.

The strategic objective of the programme is to unlock the value of investments in brownfield public sector assets by tapping institutional and long-term patient capital. the government views asset monetization as a strategy for the augmentation and maintenance of infrastructure, and not just a funding mechanism.

This four-year pipeline of the Central Government’s brownfield infrastructure assets will serve as a medium-term roadmap for the Asset Monetization initiative of the government, apart from providing visibility for the investors.

Amitabh Kant, CEO of Niti Aayog, made it clear during the launch of the pipeline that the ownership of the assets remains with the government and the private sector parties will have to follow a mandatory hand back after the completion of the period which is FY 2022 to FY 2025. It has also been made clear that no land parcels will be taken up under the NMP and it will apply only on brownfield assets in which investments have already been made but the assets are under-utilised, unutilized or not properly monetized.

The assets and transactions identified under the NMP are expected to be rolled out through a range of instruments, which include direct contractual instruments such as public private partnership concessions and capital market instruments such as Infrastructure Investment Trusts (InvIT) among others.

The thirteen sectors included in NMP framework are roads, ports, airports, railways, warehousing, gas & product pipeline, power generation and transmission, mining, telecom, stadium, hospitality and housing. The top 5 sectors (by estimated value) capture ~83% of the aggregate pipeline value.

These top 5 sectors include: Roads (27%) followed by Railways (25%), Power (15%), oil & gas pipelines (8%) and Telecom (6%). In terms of annual phasing by value, 15% of assets with an indicative value of Rs 0.88 lakh crore are envisaged to be rolled out in the current financial year (FY 2021-22).

The key assets which are to be monetised under this pipeline are listed below:

  • Road Assets worth ₹1.60 Lakh Crore

Road assets worth ₹1.60 lakh crore will be monetised over four years till FY25. This includes 26,700 KM of road assets, which is 22% of the total National Highways. The models for road assets monetisation will be Toll Operate Transfer (ToT) and Infrastructure Investment Trust (InvIT).

  • Railway Assets worth ₹1.52 Lakh Crore

Railway assets identified for monetisation include 400 railway stations, 90 passenger trains, 1 route of 1,400 km railway track, 741 km of Konkan Railway, 15 railway stadiums and selected railway colonies, 265 railway owned goods-sheds, and 4 hill railways.

  • Airports Assets worth ₹20,782 Crore

This includes monetisation of 25 AAI-managed airports and divestment of Airports Authority of India’s (AAI) residual stake in four airport JVs. This includes the private sector operated airports in Mumbai (26 % stake), Delhi (26% stake), Hyderabad (13% stake), and Bangalore (13% stake). During the current fiscal, the AAI has identified six airports in Tier 2/Tier 3 cities namely, Amritsar, Varanasi, Bhubaneswar, Indore, Raipur and Tiruchi for the purpose of monetisation through brownfield PPP models, in the current fiscal. Monetisation of bigger ones like Chennai and Vadodara is expected in 2023-24 fiscal. Calicut, Coimbatore, Madurai, Jodhpur are among the eight airports listed for monetisation in 2022-23 fiscal, while Dehradun, Agartalla and Udaipur will be taken up in the last phase in 2024-25 fiscal. The total airport assets for monetisation account for 18% of the overall airport assets under management of the AAI.

  • Power Transmission assets worth ₹45,200 crore

The transmission assets considered for monetisation during FY 2022-25 aggregate to 28,608 circuit (ckt) kms. These include transmission assets of 400 KV and above of Power Grid Corporation of India Limited (PGCIL).

  • Coal mining assets worth ₹28,747 crore

Government is aiming to monetise 160 coal mining assets including 17 projects on mine developer and operator (MDO) model, establishment of three washeries, one coal gasification plant, 35 identified first-mile connectivity projects for building coal silos/ mechanised loading, operationalisation of four discontinued/ abandoned projects and commercial auction of mines.

  • Telecom assets worth ₹35,100 crore

This includes over 2.86 lakh kilometers of optical fibre assets laid by BBNL and BSNL under rural broadband project ‘Bharatnet’  and 13,567 mobile tower assets of BSNL and 1,350 of MTNL.

 

  • Shipping assets worth ₹12,828 crore

31 projects across 9 to 12 major ports have been identified for private sector participation for improved operational efficiency and capacity utilisation of existing port assets. This will be implemented by the Ministry of Ports, Shipping and Waterways and potential models would be public private partnership (PPP).

  • Warehousing assets worth ₹28,900 crore

This includes monetisation of warehousing assets owned by state-owned firms Food Corporation of India (FCI) and Central Warehousing Corporation (CWC).  Out of the FCI available asset base, FCI owned storage infrastructure i.e. about 123 lakh tonnes is amenable for monetisation, whereas CWC’s entire capacity of 110 lakh tonnes is amenable for monetisation.

  • Realty, hotel assets worth ₹15,000 crore

The Centre plans to monetise real estate assets including several housing colonies in the national capital and eight ITDC hotels. The eight hotels are Hotel Pondicherry, Puducherry; Hotel Kalinga, Bhubaneshwar; Hotel Ranchi, Ranchi; Hotel Nilachal, Puri; Hotel Anandpur Sahib, Rupnagar; Hotel Samrat, New Delhi; Hotel Ashok, New Delhi and Hotel Jammu Ashok, Jammu.  The government has identified monetisation of seven colonies located in Sarojini Nagar, Naoroji Nagar, Netaji Nagar, Sriniwaspuri, Thyagraj Nagar, Mohammadpur and Kasturba Nagar under redevelopment as well as development of housing/commercial units on 240-acre land in Ghitorni in the national capital.

  • Sports Stadium assets worth ₹11450 Crore

The assets are largely managed  under the Sports Authority of India (SAI) and categorised into three broad categories – stadiums (managed by the Stadia division), regional centres and academic institutions. The focus of monetisation is on the stadiums and regional centres. These includes five stadiums and 10 SAI operated regional centers.

Apart from this, different assets from Natural Gas Pipeline worth ₹ 24,462 Crore, from product pipeline worth ₹22,504 Crore and from Power generation sector worth ₹ 39,832 Crore are also to be monetized.

 

~

Ashish Ranjan

Freelance Columnist

ashishranjanart@gmail.com

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