What will determine the success of the National Monetisation Plan?
The finance minister has announced a Rs.6 trillion National Monetisation Plan (NMP) for the next four years, ie FY2022-2025. This plan is geared towards infrastructure and comprises 14 per cent of the National Infrastructure Pipeline (NIP); for this year, the amount is Rs.88,000 crore. This includes more than12 line ministries and over 20 asset classes. Monetisation through disinvestment and monetisation of non-core assets have not been included in the NMP. Further, only assets of Central Government line ministries and central public-sector enterprises (CPSEs) in infrastructure segments have been currently included. The process of coordination and collation of the asset pipeline from the states is ongoing and is envisaged to be included in due course.What is being covered? Mining (Rs.0.29 trillion)Railways (Rs.1.52 trillion)Stadia (Rs.0.11 trillion)Roads (Rs.1.6 trillion)Power generation and transmission (Rs.0.85 trillion) Oil and gas and pipelines (Rs.0.47 trillion)Aviation (Rs.0.21 trillion)Ports (Rs.0.13 trillion)Telecom (Rs.35,100 cr)Urban real estate: (Rs.0.15 trillion)Warehousing (Rs.0.29 trillion) Ownership would, however, be with the government and there must be handover to the government after the tenure. This will hence be a like a PPP model, where the private sector runs the asset for a period of time but hands it back to the government subsequently. The assets and transactions identified under the NMP are expected to be rolled out through a range of instruments. These include direct contractual instruments such as PPP concessions and capital market instruments such as infrastructure investment trusts (InvITs), among others.The choice of instrument will be determined by the sector, nature of asset, timing of transactions (including market considerations), target investor profile and the level of operational/investment control envisaged to be retained by the asset owner. CARE Ratings expects to see a boost to the InVIT business as the Government has given the example of the Power Grid Corporation issuance.For states, the plan is to have three buckets under which the Centre would support them. It is expected that 26 states will be involved in this plan. This goes beyond the `100 billion allocated for infrastructure this year for states where interest-free loans for 50 years would be given. In case states go for full divestment, an equivalent amount would be paid by the Centre. If the entity is listed, 50 per cent of the amount will be matched. And if the states go for monetisation, they would get 33 per cent support from the Centre.This is an ambitious plan. For it to work, the answers to the following questions will be important, according to CARE Ratings:How quickly will decisions be taken? Have projects been identified and are frameworks in place?How will private parties react to the PPP arrangements, as the assets have to handed back to the government?What is the market appetite for such large issuances? The stock market is on a roll now, but will it last for the next few years?Do states have plans in place for disinvestment? Most of them are loss-making.These issues and more will determine the success of the plan.