The Centre’s asset monetization drive got off to a fast start with public sector assets generating revenues and investments worth Rs 1 trillion, 12% above the target set for FY22, thanks to strong performance in coal and mineral blocks, highway sections and power transmission. lines, sources said. However, the railways largely missed the sectoral target.
In total, revenues and investments mobilized from asset monetization in FY22 amounted to
96,000 crore, which will go up by at least4,000 crore after capturing some more data. The monetization goal was
88,200 crore for FY22, the first year of theNational Monetization Pipeline (NMP) of $6 trillion over four years.
Coal and mineral mining block auctions led the advance in FY22 with
58,700 crore — with coal contributing40,000 crores and other mines
18,700 crore — as against an annual target of just3,394 crore. The opening of the coal mining sector to the private sector has contributed to the auctioning of 22 blocks of coal, the awarding of MDO (mining developer and operator) contracts, etc. In addition to coal, various process relaxations contributed to the auction of 31 blocks (copper, limestone, iron ore, etc.).
In terms of value, the Ministry of Roads reached Rs 23,000 crore by monetizing 390 km of roads under the Infrastructure Investment Trusts (InvITs) and Transfer-Operate-Transfer (TOT) models, against the FY22 target of Rs 30,000 crore. The achievement of the last financial year by the roads sector is likely to increase a bit as some data has not yet been fully captured, another official said.
Private developers and relevant agencies – NHAI, PowerGrid, etc. – could use these funds to accelerate the pace of their capital spending, thereby boosting overall public investment and the creation of capital assets in the economy. “The cumulative investment potential over the years due to monetization transactions completed in FY22 is estimated at 9 trillion,” an official said.
The Ministry of Energy closed the last financial year with the monetization of assets worth Rs 9,500 crore against the target of Rs 10,470 crore. The bulk came from Power Grid, the electricity transmission utility, which undertook the monetization of its first batch of transmission assets under the InvIT model. NHPC also securitized hydel assets worth Rs 1,000 crore.
Railways, along with NHAI, is a major chunk of the four-year NMP, raised only Rs 800 crore via monetization in the last financial year against the target of Rs 17,810 crore. The goal for the railways was to monetize 40 stations in FY22 and allow private trains under the PPP model. many cede ownership of assets.
Despite the lackluster performance of the railways, the second phase of NMP in FY23 could be achieved even though the target for the year is a whopping Rs 1.62 trillion, the second official said. Under NPM, there are four approaches to raising funds and estimating monetization value – In addition to the market approach and the “capital expenditure route”, conventional accounting methods of book and enterprise values are also adopted to assess monetization value.
According to the market approach, the monetization value is determined on the basis of comparable market transactions. The capex approach is followed for asset classes that can be monetized through models based on public-private partnerships such as highways, ports, airports and electricity transmission. Here, private sector investments are counted as the monetization value.
The NMP is in line with the government’s plan to return to fiscal consolidation without delay and create the necessary fiscal leverage to finance the Rs 111 trillion national infrastructure pipeline and other projects in capital intensive. The idea is to attract private investment in infrastructure by making public matching funds available.