‘NMP is too much of talk and less action’

The finance minister unveiled the Rs 6 lakh crore National Monetisation Pipeline (NMP) to the nation on August 23. NMP follows another pipeline - a Rs 10.25 lakh crore National Infrastructure Pipeline (NIP) - launched on December 31, 2019. NMP is to be implemented over the period 2022-25, to coincide with the NIP timeframe. NMP is quite ambitious in its scope and in terms of the type of assets proposed to be monetised. It includes assets of more than 12 line ministries and more than 20 asset classes. It eyes monetisation of assets of government (e.g. stadium), non-commercial organisations and authorities under the government (roads of NHAI, warehouses) and commercial central public sector enterprises (CPSEs - power transmission lines of Powergrid). NMP expects to monetise Rs 1.50 lakh crore of assets every year on average.

The NMP was presented as if it was a brand new idea. It is not so. Three years ago, late Finance Minister Arun Jaitley had announced in the budget 2018-19 that the “government would initiate monetizing select CPSE assets using InvITs from next year”. Department of Investment and Public Asset Management (DIPAM) was entrusted with the task of taking the monetisation agenda in 2019. DIPAM notified the monetisation process on March 8, 2019. An alternate mechanism was created for granting approval for monetisation of assets. In April 2019, a monetisation threshold of Rs 100 crore was prescribed which debarred asset-owning CPSEs from carrying out monetisation of more than Rs 100 crore on their own.

The government has carried out monetisation of three kinds of assets so far - NHAI roads, airports of AAI and transmission lines of Powergrid. Monetisation of NHAI road assets using Toll Operate Transfer (TOT) model was started way back in 2017. The contract for first TOT was signed in April 2018 for concessioning a road bundle of nine select stretches of national highways totalling about 700 km for Rs 9,681 crore to an Australian company - Macquarie Group. Two more road bundles have been monetised under TOT3 and TOT5, with the rest two scrapped. The NHAI has, through these three transactions, aggregated total monetisation of about Rs 17,000 crore. The Operations, Management and Development (OMDA) concession of six airports - Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram, Lucknow and Guwahati - of AAI was awarded to Adani Airports in 2019. Powergrid raised Rs 5,000 crore in its first InvIT successfully completed in May 2021.

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The government has been able to monetise a little over Rs 25,000 crore in last four years under its monetisation programme. The target of Rs 6 lakh crore or Rs 1.5 lakh crore a year, however, is audacious - perhaps impossible for the following reasons.

First, monetisation of CPSE assets is more complex than even privatisation. Monetisation involves transfer of an operating asset or a company with operating assets to a private partner. Important decisions need to be taken about the period of concession, kind of rights transferred, regulation of the tariffs, standards of service to be maintained and so on.

There are also conflicting public policy issues and preferences. Can a single party be given all the six airports or should it be limited to maximum of two or three airports? Or, what would happen to loss making airports of AAI? The government has recently decided to bundle loss making airports with profit making airports. Due to its inability to resolve these complications, the government has not been able to do monetisation of second tranche of six airports for last 30 months. The government will face hundreds of such issues for implementing the pipeline, which looks very unlikely.

Second, monetisation involves handing over the assets/land on long leases where the government does not want to be seen selling away assets. The government was at pains to emphasise this while announcing NMP. The monetisation transactions are for long period of time. Six airports were given away for 50 years. Shorter the time frame, less remunerative the asset becomes for the recipient for making large investments to develop its full potential. This inconsistent policy objective would come in the way of getting optimum monetised value.

Contract negotiation

Third, monetisation transactions are not standard transactions. Every asset monetisation requires very comprehensive contract to be negotiated. Assets differ so much. It is difficult to standardise monetisation transactions. It is going to be hell of a difficult thing to structure these monetisation transactions across 20 different asset classes.

Fourth, most of the ministries/organisations have never carried out any monetisation. The railways have never done any monetisation transaction well. They have not even liked the idea of monetising railway tracks. Their station development and monetisation programme is going on for last seven years but has not seen successful development of seven railway stations. Monetisation of warehouses, sports stadia, power plants and ports would present very difficult set of issues.

Fifth, the government may end up turning monetisation programme as more debt raising programme. There is a hint of an NHAI owned SPV becoming the operator of the monetised road assets. For this to do, the SPV would raise debt to pay back the debt of NHAI. This type of monetisation would not a be true monetisation but a device to raise borrowing twice on the same asset. An HPCL-ONGC type of transaction in different garbs.

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Sixth, the government has reverse-delegated CPSEs powers to itself for the monetisation programme. In the MNP mechanism, the government has decided that all monetisation transactions involving Rs 100 crore or more will be structured, processed and approved in the government. Rs 100 crore is pittance. It means almost every monetisation transaction would be undertaken by the government. The complex multi-layer institutional mechanism created by the government for overall implementation and monitoring of the asset monetisation programme is likely to become millstone around the neck of the programme.

Seven, the government is over-counting monetisation proceeds. The Rs 6 lakh crore target includes two types of proceeds. First type of proceeds is the monetisation value which the public asset owner realises in upfront accruals like NHAI receives one-time payment when it gives us a bundle of roads to a concessionaire under TOT model for the right to collect and retain tolls for 30 years. The second type of monetisation proceeds is the investment which the private sector party would make on working the concession. For the airports taken on concession, the private party is given the right to develop real estate on the land on the city side of the airport. It is wrong to assume that the second type of proceeds are monetisation proceeds available to the government or its agencies for further infrastructure investments.

In the light of these challenges and difficulties, I do not see the government would be able to achieve even 20% of its monetisation target in four years. The NMP is too much of talk, much less action and implementation.

(The writer is former Union finance and economic affairs secretary)