Revenues from monetisation of brownfield public-sector assets including coal blocks, various non-coal mines, highway stretches and power transmission lines are set to either meet or even significantly exceed the respective targets for the current financial year, an official source has told FE. However, the Railways may miss the sectoral target by a wide margin. In aggregate, revenues to be mobilised via this route could still be marginally above the target of Rs 88,200 crore in FY22, the first year of the National Monetisation Pipeline (NMP), the source added.

The agencies concerned – NHAI, PowerGrid etc – could use these funds to quicken the pace of their capital expenditures, thereby giving a boost to overall public capex and fixed asset creation in the economy.

Immediately after the Narendra Modi government unveiled the NMP in August 2021, this ambitious project to boost non-debt capital receipts in the government sector got off to a quick start. The NMP seeks to generate upfront revenues of Rs 6 lakh crore in four years starting FY22, out of operational infrastructure projects, under various innovative long-term lease plans that don’t require the government to cede ownership of the assets much.

Of course, the funds raised under NMP won’t flow into the Centre’s Budget, instead various public-sector agencies will lay their hands on these receipts and put the monies to use quickly for new asset creation. The capex boost by these public sector entities will also crowd in private capex, particularly in mining, seaport & airport infrastructure, gas pipelines and warehousing facilities.

“Though monetisation targets were low for the coal and non-coal mineral sectors for FY22, the achievements could be much more higher than the respective targets,” the source said.

However, the second phase of NMP in FY23 could be challenging as the target for the year is a whopping Rs 1.62 lakh crore.

Under the NMP, there are four approaches to mobilise funds and estimate the monetisation value – apart from market approach and ‘capex route’, conventional accounting methods of book and enterprise values are also being adopted to gauge the monetisation value.

Under the market approach, the monetisation value is determined on the basis of comparable market transactions. The capex approach is followed for asset classes that may be monetised through public private partnership-based models like highways, ports, airports and power-transmission. Here, capex by the private sector is counted as the monetisation value.

Of course, some of these ventures – like the National Highways Authority of India’s bid to mobilse revenues upfront from operational highway stretches through the toll-operate-transfer (TOT) route and coal blocks allocations – had been running even prior to the NMP’s launch.

The FY22 target for monetisation of coal mines and non-coal assets (bauxite, copper, limestone, iron ore etc) was just Rs 3,394 crore or 12% of the indicative value of assets worth Rs 28,747 crore to be monetised between FY22 and FY25. As of February 1 this year, as much as Rs 4,600 crore was collected or through the mine-developer-and-operator (MDO) model where ownership of the mines will be retained by Coal India and the private developer would undertake mining activities and produce coal under a revenue-sharing mechanism. On March 2, the coal ministry also received 26 bids for 11 coal mines put under auction.

In terms of value, monetisation by the National Highways Authority of India (NHAI) could be close to its FY22 target of Rs 30,000 crore with the authority having already realised Rs 12,000 crore through Infrastructure Investment Trusts (InvITs) and Transfer-Operate-Transfer (TOT) models. The monetisation of toll receivables of Delhi- Mumbai Expressway and three bundles of ToT are being undertaken.

Power Grid, the public sector electricity transmission utility, has also mobilised about Rs 7,700 crore through monetisation transmission lines, fully achieving the FY22 target.

Railways, along with the NHAI accounts for a major share in the four-year NMP, has collected just `390 crore via monetisation in the current fiscal so far, through the redevelopment of Habibganj railway station, as against the target of Rs 17,810 crore for FY22. The target for railways was to monetise 40 stations in FY22.

With a lot of preparation already in place, officials believe the target of Rs 1.62 lakh crore asset monetisation in FY23 is achievable.

However, the railways could be laggard next year also if it doesn’t get its act together. Monetisation models of rolling stocks (private train operators) and stations are being re-examined by the railway ministry as the current models haven’t attracted investors. According to the NMP, railways need to monetise 120 railways stations, 30 trains and 1,400 km track, among others in FY23. NHAI has plans to monetise 5,476 km roads worth Rs 32,855 crore in FY23.

The NMP is in sync with the government’s plan to revert to the path of fiscal consolidation without any lapse of time and create the fiscal heft to finance the `111-lakh-crore National Infrastructure Pipeline and other capital-intensive ventures. The idea is to crowd in private investments in infrastructure by making matching public funds available.

The assets to be monetised through ‘structured contractual partnership as against privatisation or slump sale of assets’, will include highway stretches, power transmission networks, freight corridors, airports, ports, gas pipelines and warehousing facilities.

The key feature of the NMP, prepared by the Niti Aayog, is that it involves monetisation of rights, not ownership. The assets have to be returned to the government or the public agency concerned at the end of the transaction life. The government feels that since brownfield, ‘de-risked’ assets are to be offered, private investors and global patient capital would be incentivised to invest in them.