Reports suggest that the government would have missed its “asset monetisation” targets for the first two of a four-year plan—FY22 and FY23—by wide margins had it not liberally included the capital investment plans for several years into the future by private mines operators, apart from the upfront fees on mining rights lease. After being bogged down by the “twin balance sheet crisis”, corporate India has showed a sheer lack of interest to invest risk capital in high-cost greenfield fixed assets. This led the government to try and aggressively use the route of monetisation of brownfield public assets as a way to attract private capital. It has warded off criticism that this amounted to slump sale of public assets by iterating that the process doesn’t involve ownership transfers.
Even as most sectors grossly underperformed, monetisation values of the “coal and other minerals” segment were exceptional in both FY22 (Rs 58,000 crore) and FY23 (Rs 60,000 crore). Curiously, the FY22 accomplishment was against a humble initial target of Rs 3,394 crore; in FY23 too, the original goal was just Rs 6,060 crore, though it was revised mid-way through the year to Rs 37,500 crore. The government’s resolve to boost infrastructure investments is amply clear. But, that it had to sort of window-dress the monetisation figures indicates that even the revised infrastructure financing strategy, which it believes has ring-fenced private capital from business risks, may not pay off quickly enough. In the meantime, the Union budget is footing the rising bill on creation of long-lived fixed assets, which would work with labour to bolster national income and the economy’s global competitiveness.
Also read: Preparing for the global minimum tax
A tall monetisation target of Rs 6 trillion was set for the FY22-FY25 period, with the expectation that it would contribute significantly to public financing of infrastructure. Such leveraging of public assets complemented a raft of steps taken in the recent years to make available compatible debt finance to capital-intensive infrastructure projects. Besides, global patient capital—pension and sovereign wealth funds—are being tapped. The National Investment and Infrastructure Fund (NIIF), a quasi sovereign wealth fund that is designed to anchor the ambitious National Infrastructure Pipeline, has managed to raise funds from the likes of ADIA, Temasek and the Canadian public pension fund. It is slowly winning its spurs, and without much delay, may even engender leveraged finance many times its own. The National Bank for Financing Infrastructure and Development (NaBFID), unveiled in Budget FY22 with initial government capital infusion, may, however, take some time to grow in size and have the capacity to mobilise private capital in large tranches.
Also read: The true picture on the economy
India is still at a relatively early stage of infrastructure makeover. Types of infrastructure that are natural monopolies and public goods, but not direct revenue streams, will have to be built by the government. But there are vast areas, where private investments can seek remunerative returns, if markets are set free. Telecom, sea- and airports and the sunrise areas of renewable energy are examples. There is no greater incentive for private investors than market-determined tariffs. More than arranging finance, the government must ensure a credible plan for cost recovery and return on investment to lure private players. A pragmatic infrastructure plan must comprise taxes to raise dedicated public funds, decentralised public finance that would enable state governments to pitch in more meaningfully, and earmarking of lucrative areas for the private sector.