Rs 6 lakh crore amid political opposition and skepticism asset monetization Plan, Niti Aayog CEO Amitabh Kant is confident of meeting the target and promises that consumers will be protected in sectors like electricity and transfer of assets will happen through well-defined contracts. Part:
How assets are being monetized nmp Privatization, aside from sales?
The modalities and principles of monetization of assets enumerated under the NMP clearly differentiate it from privatization and sale. Under privatization or sale of assets, the private sector is the sole owner of a business or asset, enjoying full autonomy over future sales of such asset, universal availability of services, affordability to consumers, or any control from the government. There is no monitoring. and standards of service delivery. Under sale or privatization, the private proposer has no possibility to permanently buy or return the property.
For the proposed mechanisms under the NMP, monetization of assets occurs through structural contractual partnerships, similar to public-private partnership projects that have been carried out in the country for nearly 20 years now. Well-defined contractual frameworks ensure redressal of challenges including safeguarding the interests of the public and common citizens.
How confident are you to meet the annual target, especially this year?
Since the announcement of the ‘Asset Monetization’ program in the Budget for 2021-22, NITI Aayog Working with infrastructure ministries and finance ministry. Keeping the principles of public welfare, empowerment of weaker sections and socio-economic development at the heart of the program, extensive consultations have been held with key stakeholders- public property owners, private investors to prepare a realistic roadmap for the programme. The NMP, which was completed in just 4-5 months, is the first step in this direction.
The work of rolling out the initially identified assets has already been initiated by some of the Ministries. Among the assets identified for FY 2022, POWERGRID has launched its first public sector InvIT, raising Rs 7700 crore. NHAI has also placed its draft proposal document with the regulator and is currently in advanced stages of transaction. Several other sectors such as natural gas pipelines, railways, ports, airports are in advanced stages of approval or bidding. Therefore, we are confident of achieving our goals for the present and future years.
In sectors like power, how will you ensure that the incoming private parties do not burden the consumers?
The ultimate objective of the ‘Asset Monetization’ program is to make it a win-win through universal access to high quality and affordable infrastructure for all stakeholders including public authority, private investors and all common citizens. Keeping this guiding principle in mind, the monetization of assets under the NMP is envisaged in the form of a structured contractual partnership. Transfer of rights/assets will be defined by a clear contractual framework, which will ensure standards of service delivery, protection of consumers and regulation/tolerance applicable to an area, in line with the principles of the model concession framework for PPP projects .
Why is there a reluctance to sell hotel properties outright?
The properties identified under the NMP are expected to be launched through a variety of instruments. Specifically for hospitality property, the report on NMP has identified models such as PPP concession, long-term leasing and disinvestment.
While the government remains committed to its policy of ensuring minimum presence in non-strategic sectors, disinvestment of all such assets may not be possible. This is due to several factors such as location, use as well as conservation of generational equity in assets such as land, wherever it is considered necessary. There, no one model fits all concepts.
Is NMP an exercise to bridge the fiscal deficit?
The strategic objective of the asset monetization program is to unlock the value of investing in public sector assets by tapping the capital and competencies of the private sector, which can then be used for augmentation/creation of greenfield infrastructure.
While one objective is to improve fiscal headroom through innovative financing options, this is not an end in itself. It is, in fact, a holistic strategy to bring about a paradigm shift in (i) O&M and augmentation of infrastructure (ii) enabling institutional investors like Insurance Funds, Pension Funds, Sovereign Wealth Funds (iii) Retail Creation of infrastructure investment options for investors to invest in specialized infrastructure assets through instruments like InvIT’s.
How confident are you about the interest of investors in such diverse sectors?
Given that the target assets under NMP are risk-free brownfield assets with stable revenue generation profile, I am confident of investor interest.
Also, with the possibility of monetization through capital market instruments such as InvIT etc., I believe it is an opportune moment to start trading around such models, to ensure maximum accrual . The key here is the right structure, balanced risk-sharing framework and the flexibility to deploy innovative business models.
Do you see implementation as a major challenge in meeting the deadline?
Implementation is an important aspect under NMP, which is mandated for aspects like optimum structure, approval and time required for approvals as well as ensuring timing of transactions, etc. The successful implementation of NMP, therefore, hinges on an effective governance framework with escalation metrics. For real time monitoring of progress. Therefore, there is a need to streamline the framework and modalities in a way that can be easily operationalised, adopted and replicated.
Monitoring of the program will be ensured through the Asset Monetization Dashboard as envisaged under the Union Budget 2021-22. The government has constituted an Empowered Core Group of Secretaries on Asset Monetization (CGAM) under the chairmanship of the Cabinet as part of a multi-level institutional mechanism.
Secretary for overall implementation and monitoring of the programme.
How assets are being monetized nmp Privatization, aside from sales?
The modalities and principles of monetization of assets enumerated under the NMP clearly differentiate it from privatization and sale. Under privatization or sale of assets, the private sector is the sole owner of a business or asset, enjoying full autonomy over future sales of such asset, universal availability of services, affordability to consumers, or any control from the government. There is no monitoring. and standards of service delivery. Under sale or privatization, the private proposer has no possibility to permanently buy or return the property.
For the proposed mechanisms under the NMP, monetization of assets occurs through structural contractual partnerships, similar to public-private partnership projects that have been carried out in the country for nearly 20 years now. Well-defined contractual frameworks ensure redressal of challenges including safeguarding the interests of the public and common citizens.
How confident are you to meet the annual target, especially this year?
Since the announcement of the ‘Asset Monetization’ program in the Budget for 2021-22, NITI Aayog Working with infrastructure ministries and finance ministry. Keeping the principles of public welfare, empowerment of weaker sections and socio-economic development at the heart of the program, extensive consultations have been held with key stakeholders- public property owners, private investors to prepare a realistic roadmap for the programme. The NMP, which was completed in just 4-5 months, is the first step in this direction.
The work of rolling out the initially identified assets has already been initiated by some of the Ministries. Among the assets identified for FY 2022, POWERGRID has launched its first public sector InvIT, raising Rs 7700 crore. NHAI has also placed its draft proposal document with the regulator and is currently in advanced stages of transaction. Several other sectors such as natural gas pipelines, railways, ports, airports are in advanced stages of approval or bidding. Therefore, we are confident of achieving our goals for the present and future years.
In sectors like power, how will you ensure that the incoming private parties do not burden the consumers?
The ultimate objective of the ‘Asset Monetization’ program is to make it a win-win through universal access to high quality and affordable infrastructure for all stakeholders including public authority, private investors and all common citizens. Keeping this guiding principle in mind, the monetization of assets under the NMP is envisaged in the form of a structured contractual partnership. Transfer of rights/assets will be defined by a clear contractual framework, which will ensure standards of service delivery, protection of consumers and regulation/tolerance applicable to an area, in line with the principles of the model concession framework for PPP projects .
Why is there a reluctance to sell hotel properties outright?
The properties identified under the NMP are expected to be launched through a variety of instruments. Specifically for hospitality property, the report on NMP has identified models such as PPP concession, long-term leasing and disinvestment.
While the government remains committed to its policy of ensuring minimum presence in non-strategic sectors, disinvestment of all such assets may not be possible. This is due to several factors such as location, use as well as conservation of generational equity in assets such as land, wherever it is considered necessary. There, no one model fits all concepts.
Is NMP an exercise to bridge the fiscal deficit?
The strategic objective of the asset monetization program is to unlock the value of investing in public sector assets by tapping the capital and competencies of the private sector, which can then be used for augmentation/creation of greenfield infrastructure.
While one objective is to improve fiscal headroom through innovative financing options, this is not an end in itself. It is, in fact, a holistic strategy to bring about a paradigm shift in (i) O&M and augmentation of infrastructure (ii) enabling institutional investors like Insurance Funds, Pension Funds, Sovereign Wealth Funds (iii) Retail Creation of infrastructure investment options for investors to invest in specialized infrastructure assets through instruments like InvIT’s.
How confident are you about the interest of investors in such diverse sectors?
Given that the target assets under NMP are risk-free brownfield assets with stable revenue generation profile, I am confident of investor interest.
Also, with the possibility of monetization through capital market instruments such as InvIT etc., I believe it is an opportune moment to start trading around such models, to ensure maximum accrual . The key here is the right structure, balanced risk-sharing framework and the flexibility to deploy innovative business models.
Do you see implementation as a major challenge in meeting the deadline?
Implementation is an important aspect under NMP, which is mandated for aspects like optimum structure, approval and time required for approvals as well as ensuring timing of transactions, etc. The successful implementation of NMP, therefore, hinges on an effective governance framework with escalation metrics. For real time monitoring of progress. Therefore, there is a need to streamline the framework and modalities in a way that can be easily operationalised, adopted and replicated.
Monitoring of the program will be ensured through the Asset Monetization Dashboard as envisaged under the Union Budget 2021-22. The government has constituted an Empowered Core Group of Secretaries on Asset Monetization (CGAM) under the chairmanship of the Cabinet as part of a multi-level institutional mechanism.
Secretary for overall implementation and monitoring of the programme.
.