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National Monetisation Pipeline: A Simple Reckoner for Private Sector Investment in India

What is Asset Monetisation, in this context?

Asset Monetisation refers to the lease or license of a government-owned asset to the private sector, for consideration. The Pipeline includes ‘brownfield assets’ that are languishing, under-utilised or not fully monetised.

What assets are being monetised?

The Government seeks to monetise brownfield assets, i.e., assets that already exist. These include several core infrastructure assets such as roads, ports, stadiums, airports, railways, natural gas pipelines, warehouses, mines, housing, telecom etc. Land and buildings are categorised as non-core assets and are currently not being monetised.

What is the purpose of such monetisation?

This monetisation scheme envisions huge infrastructure investments, which could potentially help in reviving the economy that has suffered a setback, as a result of the pandemic. In addition, it seeks to bring a paradigm shift in the operations and maintenance of infrastructure. It also enables public sector entities to build new infrastructure.

Will the assets be sold to private investors?

No, the ownership of these assets will remain with the government. At the end of the stipulated period, the rights/assets vested with the private investors would be transferred back.

What is the nature of risks for the private investors?

The risk element is low, since the investment is in existing assets. Moreover, construction risks are completely avoided. Contracts would ideally be structured to allocate risks between the public and private sector.

What is expected from the private investors?

Day-to-day maintenance and operation of the asset is expected to be done by the private sector entity, based on the terms of the concession or contract. The consideration under this concession or contract is to be made upfront or periodically, and they would earn returns from project revenues.

What are the potential benefits to investors?

  • Stable returns over 25 to 60 years
  • Stable demand
  • Mature low-risk assets
  • High flexibility in operations and management

What is the proposed approach for monetisation?

Contracts and concessions have been explored as one of the approaches for the monetisation pipeline. Selection would be done through competitive bidding process. Under this, Public Private Partnership (PPP) concession is the prevalent structure.

Another proposed approach is a long-term fund generation raised through a pool of investors or capital markets. Selection would be done by public listing, private placement, etc. The prevalent structure for this includes Infrastructure Investment Trust (InvIT), Real Estate Investment Trust (REIT) and Asset-backed securitisation (ABS).




Disclaimer: The information provided here is based on the Monetisation Guidebook published by Niti Aayog.

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