The government must remain open-minded and flexible if it wants to meet its ambitious target.
The government’s initiative to monetise brownfield assets and realise some Rs 6 lakh crore over the next few years may sound like a promising plan, but, if it is to work as envisaged, several things need to fall into place. Bids need to be designed to succeed and not to fail, agreements with concessionaire must be well-drafted with force majeure clauses and dispute-resolution mechanisms built in, bureaucrats need to be willing to give up their turf, and KPIs and performance standards can’t be onerous. Above all, there needs to be certainty on regulation in various sectors.
The objective of the National Monetisation Plan (NMP) is to hand over brownfield assets of central ministries and CPSEs to private sector players who would sweat them and make them more productive. Leases will likely range 25-70 years, or even more, depending on the nature of the asset; in that sense, the ownership would not be transferred. Assets have been listed out, and there is plenty to choose from—roads, railways, power plants, oil & gas pipelines and telecom assets.
But the real value realisable would be known only later, once concession agreements are signed. For example, an upfront payment would fetch the government more initially as compared with a revenue-share deal.
To be sure, NHAI’ s five or six ToTs (toll-operate-transfer) offerings have been a success, as is the Power Grid Corporation’s InvIT that fetched the PSU Rs 2,736 crore. It is assumed investors bought these because the assets—roads and transmission lines—were cherry-picked and are in good condition and profitable. Also, InvITs are listed on exchanges and offer investors a quick exit.
However, other models—whether the own-maintain-transfer (OMT) or rehabilitate-operate-maintain-transfer (ROMT)—might not be as simple to manage. In the latter, for instance, the asset would need to be improved upon before it can be used. No task, however, is insurmountable as long as red tape doesn’t strangle. However, OMTs have been tried out in the roads sector and seem to be doing well. Also, while PPPs may not have been too successful in the past, it must be remembered most of these were greenfield ventures.
In the current scheme of things, however, projects are complete and, therefore, it should be possible to assess the revenue potential with a fair degree of certainty. Nevertheless, the government needs to be realistic on the terms & conditions, and must desist from interfering in the running of the asset once it has been leased. Not surprisingly, the NMP is skewed towards roads that are estimated to fetch 27% of the Rs 6 lakh crore; the sector has good assets and has experimented with a couple of forms of monetisation. The monetisation of rail assets is tipped to bring in 25%, but that might prove to be harder.
The plan to allow private firms to run trains hasn’t taken off; while some say it was because private players weren’t allowed to lease rolling stock, others say the Indian Railways itself wasn’t keen on the idea. But monetisation is taking off. For instance, tolling rights for the Mumbai-Pune Expressway have been awarded to a private player. This is obviously a prized asset, but not all assets will generate the same level of interest. The government must remain open-minded and flexible if it wants to meet its ambitious target.