Asset Monetisation for Infrastructural Investment

Announced with much fanfare as an innovative means of financing greenfield infrastructural projects, the National Democratic Alliance government’s asset monetisation plan raises a host of concerns. It seems predicated on undervaluing potential returns over a longish period to make the exercise attractive enough for the private sector to bite. It can also involve collateral effects that adversely affect sections like consumers and workers, whose representatives were not adequately consulted with when formulating the plan.

An asset monetisation plan, announ­ced in the budget, has now been fully unveiled, with a detailed listing of assets that are to be transferred for finite periods to private investors for an upfront lump sum or staggered fee. The list includes assets ranging from roads, ports, airports and railway track and stations, through fuel pipelines, telecom towers, optical fibre cabling, warehouses, and stadia. Copied from an Australian playbook, the programme is expected to help mobilise a sum of `6 lakh crore over a four-year period, by giving up whatever returns the government had expected to earn from those “brownfield” or already existing and functioning assets during the years it rests with the private investor. The investor monetising the assets would, during those years, have the right to whatever returns the asset yields. Those returns would come through receipts from use of assets, either as it is or in a refurbished condition, over a specified period, at the end of which the asset returns to the government. In an alternative model, investors buy units in an infrastructure investment trust (InvIT), which acquires the assets and has it managed to extract the returns that are then paid out to the investors. The promoters of the InvIT would have skin in the game to ensure that retail or institutional investors are protected, at least partially.