Tuesday, 19 October 2021

Under and Un - Used Assets to be Monetized by Government

Under and Un - Used Assets to be Monetized by Government

Finance Minister Nirmala Sitharaman, on 23 August, announced a 6 lakh crore Rs (NMP) National Monetisation Pipeline that will look to open the value in infra assets covering the sector.

Apart from warehousing assets, railways and roads worth 28,900 crore Rs, and Rs 11,450 crore worth from stadiums and urban real estate of Rs 15,000 crore are putting up for monetization.

Monetizing two national stadiums, including the Jawaharlal Nehru Stadium in New Delhi, and an equal number of regional centers (at Zirakpur and Bengaluru) is estimating to yield 11,450 crore Rs.

In Delhi, the Redevelopment of seven residential colonies, including those at Sarojini Nagar and Nauroji Nagaras, and the development of commercial/residential units on 240 acres of land in Delhi have also identified garner Rs 15,000 crore.

Close to Rs 29,000 crores are estimating from monetizing warehouses.

The government plans to monetize all assets through direct contractual instruments such as (PPP) public-private partnership concessions and a capital market tool (InvIT) Infrastructure Investment Trusts. InvITs will help retail investors to participate and gain from India's story of growth.

Anuj Puri, chairman - ANAROCK Property Consultants, said

"NMP is a timely and wise move and looks to be a good step towards government's vision of reducing its focus from non-core businesses and improve its fiscal standing,"

Srishti Ahuja, Partner, Strategy & Transactions, EY India, said

"The National Monetisation Pipeline is closely monitored by global leader with pension funds, infrastructure funds and wealth fund. As the primary assets are to operate, provide visibility of regular cashflow stream and do not have construction and development risk, the assets are well set off for investors to yield,"

Additionally, given that some assets will have a revenue growth trajectory (e.g., toll roads and airports) and some investments will have a fixed revenue from profile (e.g., transmission assets),

Under and Un Used Assets to be Monetized by Government 1unsplash image

Read More: New guidelines for a locker by RBI to Banks

The various pools of support will have the ability to attract a diverse set of global investors.

The success of the program, however, will also be dependent on a contractual structure.

If the concessions are for the long term for at least 15 years and if the risk allocation framework assigns risks in proportion to the underlying asset returns, the interest will be higher vis-à-vis a scenario where

For instance, the two are misaligning, where the investors bear the risk of CAPEX approvals/capacity augmentation. Still, their returns are capping, she said.

The aggregate asset pipeline under NMP over the four years, FY 2022-2025, is indicatively valued at Rs 6 lakh crore. The estimated value corresponds to around 14 percent of the proposed outlay for the Centre under NIP (Rs 43 lakh crore).

These include more than 12 line ministries and more than 20 asset classes. The sectors included are roads, ports, airports, railways, warehousing, gas and product pipeline, power generation and transmission, mining, telecom, stadium, hospitality, and housing.

Union Budget 2021-22 had identified monetization of operating public infrastructure assets as a necessary means for sustainable infrastructure financing. The Budget had provided for the preparation of a 'National Monetisation Pipeline' of potential brownfield infrastructure assets. NITI Aayog, in consultation with infra line ministries, has prepared the report on NMP.

Follow Us

Popular Post