National monetization pipeline: the key to unlocking untapped asset potential


The government will need to create a strong recourse system, independent regulation and ensure the renegotiation of concession agreements to allow a solid operational trajectory for the execution of the program.

By Anshuman Magazine,

The recently announced national monetization pipeline aligns with the government’s vision to fulfill its asset monetization mandate proposed in the 2021-2022 federal budget. The initiative aims to mainly monetize public sector assets from brownfields to raise approx. INR 6 lakh crore over four years (2022-25).

The government aims to monetize assets worth approx. INR 1.6 lakh crore from road sector (27%), INR 1.5 lakh crore from rail sector (25%), INR 79,000 crore from electricity sector (15%), followed by port sector assets , telecommunications and electricity transmission. In addition, the government plans to monetize urban real estate assets valued at Rs 15,000 crore, warehousing assets valued at Rs 28,900 crore and stadiums valued at Rs 11,450 crore. of Rs.

The national monetization pipeline was created by aggregating information provided by various line ministries and departments and assessments of existing infrastructure assets across all sectors. Although the monetization value under the NPM is a high level indicative estimate, the ultimate value will be based on a detailed assessment at a later stage.

Over the years, the government has worked on initiatives to create an enabling environment for private sector participation in nation building. By identifying assets in 13 key sectors, including roads, railways, electricity, warehousing, mining and aviation, the government has paved the way for active private sector participation in all the main driving sectors of the economy.

The monetization of these assets could be done through various models. A leading model will list the asset in the capital markets through InvIT / REIT to ensure greater transparency, accountability and wider participation of retail investors. This route will be best suited for assets with stabilized income streams with little competition, such as toll roads, power transmission and distribution, etc.

Another important model will be the PPP route. Assets can be provided under an emphyteutic lease or an operations management development agreement (OMDA) or an emphyteutic lease when active management and solid technical expertise are required and significant investments in the asset from time to time. Examples will include airports, train stations, stadiums, etc.

Some of the main benefits of the national monetization policy that will contribute to economic recovery include the efficiency of the private sector in public assets and the new technologies and solutions that can be introduced for better management of these assets. When we look at the financing and management of bandwidth, the government can focus on creating new critical infrastructure assets for the nation. It will also significantly reduce various risks (approvals, development, liaison, etc.) for the private sector since the assets are mainly industrial in nature.

With a broader goal of creating long-term world-class infrastructure and sufficient financing options, the NMP program ultimately hopes to create a cycle of “development, commissioning, monetization and investment”. Planned to align with the National Investment Pipeline (NIP), the NMP provides a foundation for departments that own assets to unlock value while monitoring the performance and maintenance of their assets.

The imperatives for success

The national monetization policy is currently a high level strategy where the nuts and bolts of the exact program with specific deadlines and milestones must be encapsulated. In addition, details regarding the intended use of funds generated by this exercise should be detailed. Responsibility and alternatives must be defined to ensure that the government can implement this program within the envisaged timeframe.

India aspires to become a $ 5,000 billion economy. To achieve this broader goal, another important government initiative is the National Infrastructure Pipe (NIP) which plans to attract investments of up to INR 111 lakh crores in several geographies and sectors of the country. Among the key goals of NPM is the idea of ​​“building infrastructure” through monetization. With an expected quantum of approx. INR 6 lakh crores, NMP’s contribution to this goal will only be significant in specific sectors. Therefore, a prioritization exercise of important / critical assets that can assist in the development of new infrastructure assets should be undertaken.

Given the monetization models considered, the private sector’s response will depend on the attractiveness of specific assets. Thus, the requirement of a detailed awareness program, followed by due diligence on each asset, will be imperative. This will help arrive at the optimal valuation and the most suitable private participation model through which monetization should occur. It is therefore highly imperative to work with industry experts and industry professionals to reach global players to ensure time-bound and results-oriented processes.

The government will need to create a strong recourse system, independent regulation and ensure the renegotiation of concession agreements to allow a solid operational trajectory for the execution of the program. States can help by showcasing their assets, including power plants, transmission networks, storage facilities and highways, so that the Center can incentivize the monetization of those assets. Thanks to the coordinated efforts of the Center and the States, funds raised through the monetization of assets could potentially exceed the target under the program.

As public assets, another key to success is to ensure transparency about the private actor selection process and the performance of the asset over a sustained period of time in order to build public confidence in the asset. the program and its benefits.

(The author is Chief Executive Officer, India, Southeast Asia, Middle East & Africa, CBRE. Opinions expressed are personal and do not reflect the official position or policy of Financial Express Online.)

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