Asset Monetisation

Developed vis a vis undeveloped

Infrastructure
Sources of Financing
% Sources of Financing
18-20% Centre’s budgetary resources
24-26% States’ budgetary resources
40% bond markets/ banks/ NBFC, equity from private developers, internal
accruals of PSUs and external aid from multilateral/ bilateral agencies
15-17% asset monetisation, funding through a new Development Finance
Institution (DFI) etc.
Meaning of asset monetisation
• To monetise something means to ‘express it or convert it into the form of
currency’. Monetising is ‘to utilise (something of value) as a source of
profit,’ or ‘to convert an asset into money or a legal tender

• Asset monetisation is the process of creating new sources of revenue for

the government and its entities by unlocking the economic value of
unutilised or underutilised public assets

• asset monetisation implies offering public infrastructure to the

institutional investors or private sector through structured mechanisms.
Asset monetisation - objective
• The strategic objective of Asset Monetisation programme is to
unlock the value of investments in public sector assets by tapping
private sector capital and efficiencies.

• can be leveraged for augmentation/ greenfield infrastructure

creation
Asset Monetisation Structure
Infrastructure Asset Monetisation
Cycle
Plan ahead
• "Monetising operating public infrastructure assets is an important

financing option for new infrastructure construction," Finance

Minister , Budget speech

• A National Monetisation Pipeline of potential brownfield

infrastructure assets has been announced, along with a dashboard

to track the progress of identified projects

Plan ahead
• PM announced investment opportunities worth in the asset
monetisation pipeline through sale of 100 assets of CPSEs-
"Monetise and modernise,"

• A pipeline of core assets, comprising over 100, falling in 31 broad

asset classes, mapped to 10 ministries/CPSEs and tentatively valued
at Rs 6 lakh crore, has been developed.

• NITI Aayog has sought information from ministries to create a four-

year monetisation pipeline (FY21-24).
National Monetisation Pipeline
• NMP will prima-facie help in evolving a common framework for
monetisation of core assets

• critically clarify its distinction from privatization, eventually helping

to create a virtuous cycle of ‘develop, commission, monetise and
invest

• Identifying potential “Monetisation-ready” projects, across various

infrastructure sectors/ ministries and simultaneously provide
visibility to investors.
COVID and Asset Monetisation
• an unprecedented toll on the economic activity - significantly
enhanced level of infrastructure investment is critical for reviving
growth
• need for resilient, environmentally sustainable and technologically
advanced infrastructure systems
• Pandemic woes – Increased social sector priorities and economic
stimuli limit
• simultaneously, reduction in risk appetite of the public and private
sector - limit private investment in greenfield infrastructure
Cycle of monetisation

Develop

Invest Commission

Monetise
Assets identified to be monetised
• toll road bundles

• railway stations, operational metro sections,

• Ports and cruise terminals,

• telecom infrastructure,

• oil and gas pipelines,

• transmission towers,

• sports stadium, warehouses, and commercial complexes.

Assets to be monetised
• Operations and maintenance of dedicated freight corridor projects of
Indian Railways,

• Highway projects of the National Highways Authority of India (NHAI),

• airports in Tier-II and III cities,

• Oil and gas pipelines of GAIL, Hindustan Petroleum Corporation Ltd (HPCL)
and Indian Oil Corporation (IOC)

• under-utilised land and other assets of central public sector enterprises

(CPSEs), were zeroed in on for monetization
Benefits of Asset Monetisation
• Helps new asset creation - Without necessarily increasing debt
levels or taxes or through reallocation of resources from other
public services/ welfare activities

• Targets efficiency gains, competition and improved performance

monitoring

• Enhances investment opportunities, depth and liquidity in

infrastructure as an asset class
Asset Monetisation Eco System and
Benefits to Stake Holders
Toll Operate Transfer Model
Toll Operate Transfer
Pointer Terms
Potential Projects Projects newly constructed and commissioned by the public
asset owner through its own funds
Primary Obligations - Operations and Maintenance of assets;

- Provide service to users against a pre-determined/

regulated or market-based fee;
Concession Period 10 years or more, depending on the asset category.
Consideration Upfront or Annual Premium (Fixed OR in form of revenue
share)
Investor Class Strategic investors or Infrastructure developer with direct
involvement / oversight in operations
Selection competitive bidding process as per prescribed guidelines
of Government
Toll Operate Transfer
• Leasing out of operational national highways (NHs) (ideally
constructed under the EPC model) with consideration paid upfront

• The road assets are awarded to winning bidders who are granted
concession to collect toll and to maintain the roads over the life of
the concession which is 15-30 years.

• The structure also provides for toll rate escalations linked to

inflation
Example of Toll Operate Transfer