Nirmala Sitharaman, the Finance Minister, announced on August 23 the establishment of a Rs 6 lakh crore National Monetisation Pipeline (NMP) to unlock value in infrastructure assets across sectors. Aside from the Rs 28,900 crore value of highways, railroads, and storage assets, stadiums worth Rs 11,450 crore and urban real estate worth Rs 15,000 crore are also available for sale. It is projected that monetizing two national stadiums, including the Jawaharlal Nehru Stadium in New Delhi, as well as an equivalent number of regional centres (in Bengaluru and Zirakpur) will earn Rs 11,450 crore.
Redevelopment of seven residential colonies in Delhi, including those at Sarojini Nagar and Nauroji Nagaras, as well as the building of residential/commercial units on 240 acres of land in Ghitorni, has also been highlighted as a potential source of Rs 15,000 crore.
The value of monetising warehouses is projected to be over Rs 29,000 crore. All assets will be monetised by the government using direct contractual instruments such as public-private partnership (PPP) concessions and capital market mechanisms such as Infrastructure Investment Trusts (InvIT). InvITs will aid individual investors in participating in and profiting from India’s economic narrative. “Overall, NMP is a timely action that appears to be a good step towards the government’s objective of decreasing non-core business concentration and improving fiscal situation,” said Anuj Puri, chairman of ANAROCK Property Consultants.
“Global sovereign wealth funds, pension funds, and infrastructure funds are all keeping a close eye on the National Monetisation Pipeline. The properties are ideally suited for yield investors since the underlying assets are operational, give visibility of a regular cashflow stream, and do not have development and construction risk,” said Srishti Ahuja, Partner, Strategy & Transactions, EY India. Furthermore, because certain assets will have a revenue growth trajectory (for example, toll roads and airports) while others will have a fixed revenue profile (for example, transmission assets), the various pools of assets will be able to attract a broad collection of international investors.
The contractual structure, on the other hand, will play a role in the program’s success. If the concessions are long-term (at least 15 years) and the risk allocation framework assigns risks proportionally to the underlying asset returns, the interest will be higher than if the two are misaligned, such as when investors bear the risk of capex approvals/capacity augmentation but their returns are capped, she said.
The total asset pipeline under the NMP is estimated to be worth Rs 6 lakh crore over the four-year period FY 2022-2025. The anticipated amount equates to around 14% of the Centre’s proposed spend under NIP (Rs 43 lakh crore). There are more than 12 line ministries and more than 20 asset classes included in this. Roads, ports, airports, railroads, warehouses, gas and product pipelines, electricity production and transmission, mining, communications, stadiums, hotels, and housing are among the industries covered.
The Union Budget for the years 2021-22 recognised the monetisation of operational public infrastructure assets as a significant source of long-term infrastructure funding. A ‘National Monetisation Pipeline’ of prospective brownfield infrastructure assets was to be prepared as part of the Budget. The report on NMP was developed by NITI Aayog in cooperation with infrastructural ministries.