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NATIONAL MONETISATION PIPELINE
Copyright © NITI Aayog, 2021
NITI Aayog, Sansad Marg,
New Delhi-110001
Designed b y
NATIONAL
MONETISATION
PIPELINE
VOLUME I: MONETISATION GUIDEBOOK NATIONAL MONETISATION PIPELINE
Volume I : Monetisation Guidebook
GOVERNMENT OF INDIA
NEW DELHI Infrastructure is critically linked to growth and economic performance. Benefits of higher
investment in good quality Infrastructure manifest in the form of increased employment
opportunities, access to market and materials, improved quality of life and empowerment
of vulnerable sections. Recognizing the importance of infrastructure, the Government has
continued its focus on sustaining and stepping up the pace of infrastructure investment.
Investment led growth is therefore, central to the economic agenda of the Government
and one of the pre-requisites of Investment led growth is capital and asset recycling. Asset
recycling and monetization is the key to value creation in Infrastructure by serving two
critical objectives, unlocking value from public investment in Infrastructure and tapping
private sector efficiencies in operations and management of infrastructure.
Under the Union Budget 2021-22, Monetization of Assets has been identified as one of
the three pillars for enhanced and sustainable infrastructure financing in the country. The
Budget also envisioned preparation of a “National Monetisation Pipeline” (NMP) to provide
a direction to the monetisation initiative and visibility of investors. In pursuance of the
same, NITI Aayog was tasked with creation of the National Monetisation Pipeline (NMP)
for brownfield core infrastructure assets.
The NMP has been created to be co-terminus with the balance NIP period, 4 year period
from FY2022 to FY2025. The NMP has been prepared based on inputs and consultations
from the respective line ministries and departments along with an assessment of the total
asset base available. The NMP document has been developed and is structured as two
volumes (Volume I & II) wherein the Volume I is being developed as a Guidebook comprising
of conceptual overview, instruments, steps involved and key reform imperatives. Volume II
comprises of the pipeline of Central Government ministries / sector wise citation of assets
along with phasing and overview of assets. The NMP is meant to serve as an essential
roadmap for the Asset monetisation of various brownfield infrastructure assets across
roads, railways, shipping, aviation, power, telecom, oil & gas, and warehousing sectors.
Asset monetisation, based on the philosophy of ‘Creation through Monetisation’, will
tap institutional investment and long term patient capital into stable mature assets in
turn generating financial resources for new infrastructure asset creation . This will enable
Preface
iii.!"! economic growth, generating employment opportunities and better prospects for
country’s youth.
Availability of a sustained and robust asset pipeline has been cited as a key concern
by investors to the Government at various forums. A well laid out pipeline hence gives
a comprehensive view to investors & developers of brown-field investment avenues in
Infrastructure. The NMP will also form a baseline for the asset owning ministeries for
monitoring and tracking performance of the potential assets. The NMP is aimed at creating
a systematic and transparent mechanism for public authorities to monitor the initiative
and for investors to plan their future activities. I hence consider the NMP document to be
a critical step towards making India’s Infrastructure truly world class.
The Government as part of a multi-layer institutional mechanism for overall implementation
and monitoring of the Asset Monetization programme, has constituted an empowered
Core Group of Secretaries on Asset Monetization (CGAM) under the chairmanship of
Cabinet Secretary. Detailed deliberations with the line Ministries and Departments on
the asset pipelines have been undertaken at the meetings of the CGAM chaired by the
Cabinet Secretary.
The NMP is a culmination of insights, feedback and experiences consolidated through
consultations with the concerned line Ministries and Departments, multi-stakeholder
consultations and a series of one-to-one consultations with prominent global investors
conducted over the last six months.
Asset Monetisation programme and the NMP took shape because of the vision and
conviction of our Hon’ble Prime Minister who has always encouraged us to pursue
excellence in delivering Infrastructure to common citizen of India. I am grateful to Hon’ble
Finance Minister for the landmark Union Budget 2021, her inspiration and encouragement
that made this report possible. In this endeavour, we owe our deepest gratitude to the
Cabinet Secretary, under whose guidance, the Monetisation programme has and continues
to gain momentum. I also thankfully acknowledge the support provided by the members
of the CGAM, Secretary (DEA), Secretary (Revenue), Secretary (Expenditure), Secretary
(DIPAM), Secretary (DPE), Secretary (Corporate Affairs), Secretary (Legal Affairs) and all
the Secretaries of the relevant ministries and departments in development of the NMP.
None of this would have materialised without the unflinching support and guidance of the
head of our institution, Dr. Rajiv Kumar, Vice Chairperson who inspired us in our endeavour
to prepare and launch the NMP with a vision to serve as a roadmap for India’s Asset
Monetisation programme. Finally, a deep sense of gratitude to the Asset Monetisation
team at NITI Aayog : Partha Sarathi Reddy, Alpna Jain, Arpana Bhatt and Sujit Jena, for
their remarkable efforts in working relentlessly during the pandemic to research and create
the NMP. Lastly, the support provided by CRISIL team towards our work on NMP needs
a special mention.
We thank all the members for their support and contribution.
New DelhiAmitabh Kant
July, 2021CEO, NITI Aayog
iv . ! " fi! Volume I: Monetisation Guidebook
1. Infrastructure Imperative 1
1.1 Infrastructure: An Enabler of Growth 2
1.2 Investment Plan & Financing under NIP 3
1.3 Initiatives under Union Budget 2021-22 4
1.4 Asset Monetisation – The Concept 4
1.5 National Monetisation Pipeline 7
1.6 Organization of this Guidebook 8
2. Asset Monetisation— Framework and Instruments 9
2.1 Core Asset Monetisation 10
2.2 Core Asset Monetisation Framework 12
2.3 Monetisation Models 14
2.4 Direct Contractual models – Brownfield PPP Concessions 16
2.5 Long Term Lease 23
2.6 Infrastructure Investment Trust 24
2.7 Real Estate Investment Trust 29
.8 Factors determining choice of model 34
3. Asset Monetisation Experience: India and Beyond 35
3.1 Australia’s Asset Recycling Initiative (ARI) 36
3.2 Indonesia’s Limited Concession Scheme (LCS) 40
3.3 REITs in non-traditional real estate sectors 42
3.4 Other notable transactions 44
Contents
vContents 4. Preparatory Stage 47
4.1 Overview 48
4.2 Step 1 – Preparation of asset monetisation and financing plan 48
4.3 S<> tep 2 – Asset Screening and Packaging 49
4.4 S<> tep 3 – Transaction Structuring 50
4.5 S<> tep 4 – Approval/ sanction 51
5. Transaction Stage 53
5.1 InvIT – Regulatory framework and process 54
5.2 REIT – Regulatory framework and monetisation process 57
5.3 PPP Concession based models – Framework and process 60
6. Key imperatives for Monetisation 63
6.1 Recent initiatives by Government of India 64
6.2 K<> ey Imperatives 66
7. Annexure 71
Annexure I : Circulars, rules and guidelines pertaining to InvIT 72
viContents Volume I: Monetisation Guidebook LIST OF FIGURES
Figure 1: Infrastructure Vision 2025: Meeting aspirations and improving ease of living 2
Figure 2: Sources of financing for NIP 3
Figure 3: Initiatives under Budget 2021-22 4
Figure 4: Asset Monetisation Structure 6
Figure 5: Infrastructure Asset Monetisation Cycle 6
Figure 6: Objectives of the National Monetisation Pipeline 7
Figure 7: Core and Non-Core Asset Classes 10
Figure 8: Asset Monetisation Eco-System and Benefits to Stakeholders 13
Figure 9: Framework features for Core Asset Monetisation 13
Figure 10: Core Asset Monetisation approaches 15
Figure 11: Brownfield PPP Models 16
Figure 12: OMT Broad Structure 17
Figure 13: OMD Structure 20
Figure 14: Long term Lease Models 23
Figure 15: InvIT transaction – Illustrative structure 25
Figure 16: Key Benefits of InvIT 26
Figure 17: InvIT transaction – Illustrative steps 27
Figure 18: REIT transaction – Illustrative structure 30
Figure 19: Benefits and Limitations of REIT 31
Figure 20: Illustrative ARI process 37
Figure 21: Major public assets monetised under the ARI 38
Figure 22: Notable investors participating in Australia’s Asset Recycling Initiative 38
Figure 23: Key features of Indonesia’s LCS initiative 41
Figure 24: Process roadmap 48
Figure 25: Sectorial investment and financing plan – Illustrative steps 49
Figure 26: Steps in project structuring 50
Figure 27: End to End Process for Project Preparation 51
Figure 28: Elements of SEBI InvIT Regulations 54
Figure 29: Step by Step Issuance Process 56
Figure 30: Procedure for Public Procurement 61
Figure 31: Imperatives for Asset Monetisation 67
viiContents Volume I: Monetisation Guidebook LIST OF TABLES
Table 1: Snapshot of Infrastructure asset base under key public sector entities 11
Table 2: Features of Direct Contractual mode 15
Table 3: Features of Structured Financing Instruments 15
Table 4: Key Terms of an OMT Concession 17
Table 5: TOT bundles bid out by NHAI till date 18
Table 6: Key Terms of an OMD Concession 20
Table 7: Key Features of Lease 24
Table 8: Key Requirements/ Terms of an InvIT 26
Table 9: Key InvIT transactions 27
Table 10: Key Requirements/ Terms of an REIT 30
Table 11: REIT transactions in India 33
Table 12: Salient features of SEBI InvIT Regulations 2014 54
Table 13: Salient features of SEBI REIT Regulations 2014 57
viiiContents Volume I: Monetisation Guidebook AcronymDefinition
Acronym Definition
AAIAirports Authority of India
BOOBuild-Own-Operate
BOQBill Of Quantities
BOTBuild-Operate-Transfer
BPCLBharat Petroleum Corporation Ltd
BSEBombay Stock Exchange
BSNLBharat Sanchar Nigam Limited
CCOCoal Controller’s Organisation
CEOChief Executive Officer
CERCCentral Electricity Regulatory Commission
CILCoal India Limited
CODCommercial Operations Date
CPSECentral Public Sector Enterprise
CRWCLCentral Railside Warehouse Company Limited
CWCCentral Warehousing Corporation
DFCCIL Dedicated Freight Corridor Corporation of India Limited
DFIDevelopment Finance Institution
DWTDeadweight Tonnage
EPCEngineering, Procurement and Construction
ESGEnvironmental, Social and Governance
FBBFixed Broadband
FCIFood Corporation of India
List of
Abbreviations
ixList of Abbreviations FDIForeign Direct Investment
GAILGas Authority of India Limited
GISGeographic Information System
HAMHybrid Annuity Model
HPCLHindustan Petroleum Corporation Limited
IDBIIndustrial Development Bank of India
IOCLIndian Oil Corporation Ltd.
IPAInitial Portfolio of Asset
IRSDCIndian Railway Stations Development Corporation Limited
JLNJawaharlal Nehru Stadium
JNPTJawaharlal Nehru Port Trust
LFPLand Fall Point
LILOLoop-In-Loop-Out
LMTLakh Metric Tonnes
LNGLiquefied Natural Gas
LPGLiquefied Petroleum Gas
MCAModel Concession Agreement
MCLRMarginal Cost of Funds-based Lending Rate
MDOMine Developer and Operator
MFCMulti-functional Complexes
MIRAMacquarie Infrastructure and Real Assets
MIVMaritime India Vision
MMLHMulti Modal Logistics Hub
MMTPAMillion Metric Tonnes Per Annum
MTNLMahanagar Telephone Nigam Limited
MTPAMillion Tonnes Per Annum
MVAMega Volt Amp
NBFIDNational Bank for Financing Infrastructure and Development
NDCPNational Digital Communications Policy
NHAINational Highways Authority of India
NHPCNational Hydroelectric Power Corporation
NIPNational Infrastructure Pipeline
NITINational Institution for Transforming India
NLCNLC India Limited (formerly Neyveli Lignite Corporation Limited)
NMPNational Monetisation Pipeline
NRPNational Rail Plan
NSENational Stock Exchange
xList of Abbreviations Volume I: Monetisation Guidebook NSECNetaji Subhas Eastern Regional Centre
NSSCNetaji Subhas Southern Centre
NSWCNetaji Subhas Western Centre
NTPCNational Thermal Power Corporation Limited
OFCOptical Fibre Communication
OHEOver Head Equipment
OMDAOperations, Management and Development Agreement
OMTOperate Maintain and Transfer
ONGCOil and Natural Gas Corporation Limited
ORROuter Ring Road
PEGPrivate Entrepreneurs Guarantee
PFCPower Finance Corporation
PFTPrivate Freight Terminal
PGCILPower Grid Corporation of India Limited
PNGRBPetroleum and Natural Gas Regulatory Board
PPPPublic-Private Partnership
PUAPipeline Usage Agreement
RECRural Electrification Corporation
REITReal Estate Investment Trust
RFPRequest for Proposal
RFQRequest for Qualification
ROWRight of Way
RPORenewable Purchase Obligations
RTMRegulated Tariff Mechanism
SAISports Authority of India
SARODSociety For Affordable Redressal Of Disputes
SEBISecurities and Exchange Board of India
SECISolar Energy Corporation of India
SJVNLSatluj Jal Vidyut Nigam Limited
SPVSpecial Purpose Vehicle
STPSSuper Thermal Power Station
TBCBTariff Based Competitive Bidding
TEUTwenty Feet Equivalent Unit
TOTToll-Operate-Transfer
TSATransmission Service Agreement
USDUnited States Dollar
WPIWholesale Price Index
xiList of Abbreviations Volume I: Monetisation Guidebook Infrastructure
Imperative
1
Infrastructure Imperative 1 1.1 INFRASTRUCTURE: AN ENABLER OF GROWTH
Investment in infrastructure is pivotal for accelerated and inclusive socio-economic
development of a country. In the absence of adequate and robust infrastructure facilities,
the economy operates at a sub-optimal level remaining distant from its potential and
frontier growth trajectory.
With such imperative–to bridge the existing infrastructure gaps and cater to its future
potential and needs–the Government of India (GoI) undertook a first-of-its-kind and a
whole-of-government exercise in FY 2019-20, to lay the infrastructure vision for the country.
Pursuant to which, the National Infrastructure Pipeline (‘NIP’), detailing the infrastructure
vision for the country, was released in December 2019. As per the Report of the Task
Force for NIP:
‘..The vision, mission and strategic goals would be towards improving the ease of
living or physical quality of life for each individual in the country. And investment in
infrastructure would aim to achieve the aspirational standards in consonance with SDG
-2030 for same..’
Imperativeness of such vision and large-scale infrastructure investment has only been
more pronounced with the recent coronavirus (COVID) pandemic. With the crisis taking
an unprecedented toll on the economic activity in the country, significantly enhanced
level of infrastructure investment is critical for reviving growth. Furthermore, the crisis
has emphasised the need for resilient, environmentally sustainable and technologically
advanced infrastructure systems, which in turn necessitates targeted approach towards
SDG based aspirational standards under NIP.
Figure 1: Infrastructure Vision 2025: Meeting aspirations and improving ease of living
2Infrastructure Imperative Volume I: Monetisation Guidebook 1.2 INVESTMENT PLAN & FINANCING UNDER NIP
During the twelfth plan period, infrastructure investment in India aggregated to Rs 36 lakh
crore, averaging at ~5.8% of GDP. Further, for FY 2018 and 2019 it has been estimated at
~Rs 10 lakh crore
1
. Going forward, the NIP envisions a significant step-up from the current
levels. This is largely in view of recommended infrastructure investment levels of 7-8% of
GDP
2
, so as to ensure requisite capacity and quality of infrastructure within the country.
NIP envisages infrastructure investment of Rs. 111 lakh crores over five-year period from
FY 2020 to FY 2025. With annual average investment of ~Rs. 22 lakh crore, this is a
significant step-up (~2.5 times) vis-à-vis historical levels of spending on infrastructure.
Achievement of incremental annual investment of 2-3% of GDP
3
, as envisaged under NIP,
has the potential to enable double digit economic growth (for corresponding period)
for the country. Which in turn will ensure enhanced economic activity and employment
opportunities in a post-crisis economy. Successful and timely implementation of projects
planned under NIP, hence, remains a key focus area for both Central and State Governments.
One of the major pre-requisites for this, however, is the availability of capital. Under NIP,
traditional sources are expected to finance 83–85%
4
of the envisaged capital expenditure.
This includes ~18-20% financing through Centre’s budgetary resources and 24-26% through
the States’ budgetary resources. Another ~40% is proposed to be raised through extra-
budgetary resources/ private sector investment (in form of debt from bond markets/
banks/ non-banking financial companies, by way of equity from private developers/
internal accruals of PSUs and external aid from multilateral/ bilateral agencies).
Further, as estimated by the NIP task force report, about 15-17% of the outlay is to be
met through innovative and alternative initiatives viz. asset monetisation, funding through
a new Development Finance Institution (DFI) etc. Of which asset monetisation has been
suggested as a tool to monetise operational assets at both Central and State levels.
Budgetary Sources Private or Extra Budgetary Sources
Innovative and
alternative
financing sources
Central Budget (18-20%)
Financing by Banks (8-10%)
Innovative and
alternative financing
(15-17%)
Bond Markets (6-8%)
State Budget (24-26%)
Infrastructure NBFCs (15-17%)
PSU Accruals, Equity and Others
(8-15%)
Figure 2: Sources of financing for NIP
1 Report of the Task Force for National Infrastructure Pipeline (DEA, Ministry of Finance)
2 Economic Survey 2018-19
3 Based on envisaged outlay, as percentage of GDP, vis-a’-vis previous period investment during
FY 2013-19
4 Report of the Task Force for National Infrastructure Pipeline (DEA, Ministry of Finance)
3Infrastructure Imperative Volume I: Monetisation Guidebook 1.3 INITIATIVES UNDER UNION BUDGET 2021-22
GoI’s commitment towards realising the vision for country’s infrastructure has been further
put in motion via the Union Budget 2021-22. In line with the recommendations of NIP
task force report, Budget 2021-22 has laid out a three-pronged strategy for enhanced and
sustainable infrastructure financing in the country. This entails:
i. Creation of institutional structures;
ii. Thrust on monetisation of assets, and
iii. Enhanced share of capital expenditure in Central and State budgets.
~Rs 3.8 lakh crore has been allocated as capital outlay for various infrastructure projects
under Union Budget 2021-22
5
. This is broadly in line with the recommended quantum
of funding for the corresponding period, through Central budgetary resources, under
NIP. Such enhanced budgetary outlay
6
, in addition to accelerating projects envisaged
under NIP, is aimed at inducing a multiplier impact
7
towards fulfilling the more immediate
objective of reviving economy in a post COVID scenario.
From a medium to longer term perspective, the Budget proposes the following initiatives
for creating a sustainable institutional framework for funding of infrastructure assets in
the country:
Development Finance Institution (DFI)Asset Monetisation
Professionally managed DFI to act
as provider, enabler and catalyst for
infrastructure financing
Monetising operating public infrastructure
assets for new infrastructure construction
National Bank for Financing Infrastructure
and Development Bill (2021) passed in
March 2021
A body corporate with initial GoI holding of
~100% (more than 26% at all times)
Initial share capital of Rs 20,000 crore
Target Lending portfolio: Rs 5 lakh crore (3
years)
National Monetisation Pipeline of potential
brownfield infrastructure assets
Asset Monetisation dashboard for tracking
progress and for providing visibility to
investors
Various assets/ asset classes targeted for
monetisation during FY 2021-22
Figure 3: Initiatives under Budget 2021-22
8
1.4 ASSET MONETISATION – THE CONCEPT
Financing of infrastructure investments requires a diversified set of alternatives, especially
so in emerging economies like India. And the scale at which it has been currently envisaged
under NIP, it can only be made possible through a re-imagined approach, and a look
5 Union Budget 2021-22 – Expenditure Profile
6 2 times the Revised Estimates for FY 2020-21 as per Union Budget 2021-22 – Expenditure Profile
7 2X based on comparative assessment of countries by S&P Global ratings (2018);
8 Para 45 (DFI) and Para 47 (Asset Monetisation) under Budget 2021-22
4Infrastructure Imperative Volume I: Monetisation Guidebook beyond the traditional sources or models of financing. It is, therefore, that NIP has
emphasized on innovative mechanisms–such as asset monetisation–for generating
additional capital.
The need for adoption of such alternative mechanisms
has only been further pronounced in the wake of
COVID-19. On one hand, the budgetary imperatives
of social sector priorities and economic stimuli limit
fiscal headroom. While simultaneously, reduction in
risk appetite of private developers/ equity investors
and debt financiers. limit private investment in
greenfield infrastructure. This invariably necessitates
innovative mechanisms, structured around mature
brownfield assets, for tapping of private sector
investment.
A sizeable inventory of infrastructure assets has been created over the past decade through
public investments. This can now be leveraged for tapping private sector investment and
efficiencies.
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.
Which can thereafter be leveraged for augmentation/ greenfield infrastructure creation.
Asset monetisation, also commonly referred to as asset or capital recycling, is globally
a widely used business practice. This consists of limited period transfer of performing
assets (or disposing of non-strategic / underperforming assets) to unlock “idle” capital
and reinvesting it in other assets or projects that deliver improved or additional benefits.
Governments and public-sector organizations, which own and operate such assets and
are primarily responsible for delivering infrastructure services, can adopt this concept to
meet the ever-increasing needs of the population for improved quality of public assets
and service. However, suitable structuring of such transactions is extremely critical from
the perspective of public interest and service aspects.
Asset Monetisation, as envisaged here, entails a limited period license/ lease
9
of an
asset, owned by the government or a public authority, to a private sector entity for an
upfront or periodic consideration.
Transfer of such rights in lieu of an upfront/ periodic consideration is defined by a well-
defined concession/ contractual framework. This enables a balanced risk sharing framework
between the public authority and private party. The private sector entity is expected to
operate and maintain the asset based on the terms of the contract/ concession, generating
returns through higher operating efficiencies and enhanced user experience. Funds, so
received by the public authority, are reinvested in new infrastructure or deployed for other
public purposes. Such contracts include provision for transfer of asset back to the public
authority at end of such contract.
9 Sale i.e. transfer of legal ownership of assets is only envisaged in cases such as disinvestment of stake etc.
5Infrastructure Imperative Volume I: Monetisation Guidebook Public Authority
Asset / Rights
Private Investor(s)
Operations &
Maintenance
Concession
Consideration
Figure 4: Asset Monetisation Structure
Asset Monetisation needs to be viewed not just as a funding mechanism, but as an overall
strategy for bringing about a paradigm shift in infrastructure operations, augmentation
and maintenance. This is especially considering the potential for resource and capital
efficiencies as also the ability to dynamically adapt to the evolving global and economic
reality.
It presents an opportunity for public asset owners to avail new financial structures
10
and
vehicles for tapping capital from private sector investors (strategic, institutional, retail
etc). In the process, it helps public sector authorities/ entities in easing fiscal constraints
and freeing up the balance sheets for taking up more greenfield infrastructure creation.
This enables deployment of resources by government towards social sector and other
competing public priorities.
Figure 5: Infrastructure Asset Monetisation Cycle
10 Simplistic representation for purpose of conceptual understanding
6Infrastructure Imperative Volume I: Monetisation Guidebook 1.5 NATIONAL MONETISATION PIPELINE
For Asset Monetisation initiative, to progress in the right direction, it is imperative that
the Government makes available a strong pipeline of attractively structured, brownfield
projects. Further, sustained flow of transactions and visibility on same, across asset
classes, is a key pre-requisite of long-term investors. A robust asset pipeline, not only
enables investors to plan their fund raisings and investment timelines, but also helps
asset owners track and scan the performance of assets.
Within this context, National Monetisation Pipeline (NMP) was announced in the Union
Budget 2021-22 and NITI Aayog has been entrusted with the mandate to develop
National Monetisation Pipeline.
Asset Monetisation being inextricably linked to new infrastructure creation, NMP has
been planned to be co-terminus with the remaining four-year period of the National
Infrastructure Pipeline (NIP). NMP forms a baseline for the asset owning ministries for
monitoring and tracking – investment, performance and data on potential assets, for
the 4-year period from FY 22 to FY25. The Report on National Monetisation Pipeline
has been structured as a (i) Guidance book for Asset Monetisation (Volume I) and
(ii) Medium-term Roadmap including the pipeline of assets (Volume II). NIP and NMP,
together, are envisaged to give a comprehensive view on greenfield and brownfield
investment avenues in Infrastructure.fiffffi fl ff ffi flfffl
ffiffi
ffi flff ffiffi
ffifl ff ff ffiff
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fiffffiffffi ff ff
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Figure 6: Objectives of the National Monetisation Pipeline
NMP will prima-facie help in evolving a common framework for monetisation of core
assets. It will critically clarify its distinction from privatization, eventually helping to create a
virtuous cycle of ‘develop, commission, monetise and invest’. It will also help in identifying
potential “Monetisation-ready” projects, across various infrastructure sectors/ ministries
and simultaneously provide visibility to investors.
7Infrastructure Imperative Volume I: Monetisation Guidebook A well strategized Asset Monetisation programme:
!Is structured around:
—Monetising assets with high appetite among investors; and
—Reinvesting proceeds into assets/services that citizens desire.
!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
—Effectively incentivizing specialized investor classes (viz. domestic and foreign
pension funds, etc.)
1.6 ORGANIZATION OF THIS GUIDEBOOK
Volume I (Guidance book) is structured as a ready-reckoner for public authorities and
investors while going about the asset monetisation process, particularly in the context of
India. It presents guidance on the various models, global case studies, preparatory actions,
the regulatory framework and asset monetisation process.
The Guidance book is divided into six sections aligned with the tasks to be carried out
towards asset monetisation:
Section 1: Infrastructure Imperative: Setting the context of the Asset Monetisation;
Section 2: Asset Monetisation – Framework and Instruments: Categories,
models and instruments for asset monetisation including examples for better
understanding of structures;
Section 3: Asset monetisation experience: India and beyond: Experiences on
asset monetisation/ recycling from the developed and other emerging markets
and key takeaways;
Section 4: Preparatory Stage: Steps in identifying assets, selecting the right
instruments etc. and approval and sanction process before initiating an asset
monetisation transaction;
Section 5: Transaction Stage: An overview of the regulatory framework for
respective instruments;
Section 6: Key imperatives for Monetisation: Imperatives for efficiency and
efficacy of Asset Monetisation initiative.
8Infrastructure Imperative Volume I: Monetisation Guidebook 2
Asset Monetisation—
Framework and
Instruments
This section provides an overview
of the approach to core asset
monetisation, in India’s context.
This includes key tools,
instruments including
their broad features,
benefits and
limitations
etc.
Asset Monetisation— Framework and Instruments 9 2.1 CORE ASSET MONETISATION
The assets held by the government/ public sector entities/statutory bodies broadly include
operational/ under-construction projects, land, buildings, investment in subsidiaries/ joint
ventures etc . From amongst these,
Assets which are central to the business objectives of such entity and are used for
delivering infrastructure services to the public/ users are considered as Core Assets
for the purposes of monetisation herein.
Infrastructure
11
includes asset classes such as transport (roads, rail, ports, airports), power
generation, transmission networks, pipelines, warehouses etc. The other assets, which
generally include land parcels and buildings, can be categorised as non-core assets.
Figure 7: Core and Non-Core Asset Classes
Of the various Core Assets, assets which are currently generating revenue OR those
which have substantially completed facilities and can be suitably augmented for future
operations have been considered as potential Core Assets for monetisation herein.
2.1.1 Core Asset Base
Investment, as measured by Gross Fixed Capital Formation (GFCF), has on an average
been 30% as a component of GDP in the previous 5-year period i.e. FY 2017 – FY 2021
12
.
This capital formation has been led by mega public investment programmes such as
Bharatmala, Sagarmala, Dedicated Freight Corridor, Jal Shakti and Pradhan Mantri Awas
Yojana etc.
Owing to several years of such large-scale public investment programmes, a significant
public infrastructure asset base has been created at the level of CPSEs, departments and
11 Based on the Harmonized Master list of Infrastructure sub-sectors published by Department of Economic
Affairs
12 National Statistical Office (NSO), Ministry of Statistics and Programme Implementation
10Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook statutory entities, both within the Central as well as State government. A snapshot of
the scale of core assets, managed across key Central Government entities and sectors, is
provided in table below.
Table 1: Snapshot of Infrastructure asset base under key Central govt. public entities
13
S.No.Asset class Ministry / entity
Key asset
variable
Value
1 Roads Ministry of Road
Transport & Highways
through National
Highways Authority of
India
Length of
National Highway
network
132,499 km
14
2 Power
transmission
Ministry of Power
through Power Grid
Corporation of India
Ltd.
Transmission
network and
substations
171,950 km transmission
lines, 262 sub-stations
with 444,738 MVA
transformation capacity
15
3 Power
generation
National Thermal Power
Corporation (and its
JVs & subsidiaries)
Thermal
generation
60,224 MW
16
4National Hydroelectric
Power Corporation
National Thermal Power
Corporation
Hydro &
renewable
generation (Solar)
4,912 MW (NTPC and
its JVs & subsidiaries)
7,071 MW (NHPC)
5 Airports Airport Authority of
India
Number of AAI
airports
137 airports
17
6 Ports 12 Major Port Trusts Handling capacity
of major ports
1535 MMTPA
18
7 Telecom
Towers
Bharat Sanchar Nigam
Ltd
Mahanagar Telephone
Nigam Ltd
Number of
telecom towers
69,047 towers
8 Optical Fibre
Cable
Bharat Broadband
Network Limited
Length of optical
fibre cable
5,25,706 km (laid under
Bharatnet)
19
9 Railway
Stations
Indian Railways Number of
railway stations
pan India
7,325 stations
20
13 Asset base directly/indirectly owned or through private participation or otherwise
14 https://nhai.gov.in/nhai/sites/default/files/NationalHighwaySummary.pdf
15 https://www.powergridindia.com/company-overview-0
16 https://www.ntpc.co.in/en/power-generation/installed-capacity
17 https://www.aai.aero/en/corporate/organization
18 http://shipmin.gov.in/sites/default/files/BPS2020.pdf
19 http://bbnl.nic.in/
20 Indian Railways Annual Reports 2019-20
11Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 11Railway
Track
Indian Railways Track network 1,26,366 track km
(67,956 route length)
20
12 Natural gas
pipeline
Gas Authority of
India Ltd, Indian Oil
Corporation Ltd &
others
Length of
operational
pipeline network
19,998 km
21
13 Petroleum
& products
pipeline
IOCL, HPCL, BPCL, OIL Length of pipeline
network
14,623 km
21
14 Warehouses Food Corporation of
India,
Central Warehousing
Corporation & other
agencies
Warehousing
capacity
818 lakh MT
22
15 Sports
stadium
23
Sports Authority of
India,
Ministry of Youth Affairs
& Sports
Number of Sports
Stadia & regional
centres
5 national stadia
and various Regional
centres
24
2.2 CORE ASSET MONETISATION FRAMEWORK
Governments regularly invest in new infrastructure creation by way of budgetary
allocations. Asset Monetisation approach for such assets, enables a whole lifecycle and
system-wide perspective, combining monetisation and new infrastructure creation into a
long-term view. It leverages the capital tied up in existing infrastructure assets and aims
to reap potential benefits by monetising these assets and directly reinvesting capital
proceeds for creation of new or improvement of existing infrastructure.
Asset monetisation has two inextricably linked facets;
aLease or divestment of rights over existing assets; and
aReinvesting in new infrastructure.
While in the past, divestment of rights over existing assets has been carried out by
government and public-sector organizations, the proceeds from such divestment have
not necessarily been invested in new infrastructure creation. Further, such divestment has
largely been focussed on stakes in companies/ subsidiaries or occasionally in non-core
assets such as land or building. Lease or long-term concession of core operational assets,
in a manner which garners upfront funds and can thereafter be leveraged/ invested in
other infrastructure assets, has rather been occasional/ sector-specific. Given however the
benefits of this approach, agencies such as National Highways Authority of India have
deployed such mechanisms for upfront fund raising and new infrastructure creation. There
21 https://www.pngrb.gov.in/eng-web/data-bank.html#ngpl-1
22 https://fci.gov.in/storages.php?view=35
23 Consists of stadium assets under Ministry of Youth Affairs & Sports, additional sports stadiums under
other public entities such as Indian Railways are not included
24 Ministry of Youth and Sports Affairs Annual Report 2019-20
12Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook is now a need to systematically adopt these initiatives across varied asset classes and
streamline the frameworks and modalities of such alternatives in a manner which can be
readily absorbed, evaluated and replicated.
Figure 8: Asset Monetisation Eco-System and Benefits to Stakeholders
2.2.1 Framework features
The framework for monetisation of core assets has three key imperatives.
Figure 9: Framework features for Core Asset Monetisation
aSelection of de-risked and brownfield assets with stable revenue generation
profile (or long-term revenue rights) that can be clearly ring-fenced, is of critical
importance.
aTransaction should be structured around revenue rights as against transfer of full
ownership. Towards this, hand back of assets to the original asset owner at the
end of transaction life is a key requirement.
13Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook
aMonetisation should be viewed as structured contractual partnerships and not
privatization or slump sale of assets. Well-defined contractual frameworks should
be adopted which allow government authorities to have clearly laid down KPIs
(Key Performance Indicators) and standards for assets.
aSelection of private partner should be through a transparent mechanism and the
utilization of proceeds received should be towards well-defined uses such as new
infrastructure creation etc.
2.2.2 Considerations for contractual structuring
Infrastructure assets entail a clear need for the government to retain a degree of oversight
and control by way of either contractual mechanisms or regulations. This is because the
projects around these assets typically involve
25
:
i. Transfer of public assets including land;
ii. Delegation of governmental authority to collect and appropriate user charges
that are levied by force of law and must therefore be ‘reasonable’; Protection of
user interests and the need to secure value for public money
iii. Provision of services to users in a monopoly or semi-monopoly situation, which
imposes a special obligation on the government to ensure adequate service
quality; and
iv. Sharing of risks and contingent liabilities by the government, as applicable.
Because of such pre-requisites and nature of risks, as also involvement of multiple parties
– including project sponsors, lenders, government entities, public users and regulatory
authorities etc – monetisation of infrastructure assets can be complex. This mandates
detailed due diligence, legal and contractual agreements that clearly set forth the risks,
rewards and obligations of various participants.
Monetisation of infrastructure assets should hence be structured with a careful
consideration to protection of user interests and maximization of value to the public
authority (similar to that in case of Public Private Partnerships projects).
2.3 MONETISATION MODELS
Asset Monetisation can be undertaken through a range of instruments/ tools. This section
summarizes some of the few models, which have been utilized and have proven to be
effective in monetising brownfield assets.
26
Monetisation models which are currently being
explored/ availed may broadly be categorized into two approaches: (i) Direct Contractual
Approach and (ii) Structured Financing models.
25 Features of Infrastructure projects as identified under Procedure for Approval of Public Private Partnership
Projects
26 Models, included herein, are only some of the structures adopted/ with potential for adoption; The list is
not comprehensive and will vary based on the features of the assets and the expectations of authority,
investors and users.
14Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook ‘Direct Contractual’
Approach
Structured financing
models
Concession/ contract
between a public entity and
identified private sector
developer(s)/ investor(s)
Structured instruments for
long-term fund generation
via capital markets or
through a pool of investors
Figure 10: Core Asset Monetisation approaches
The aforementioned classification has solely been used, for the purpose of this Guidebook,
to delineate the broad principles under various models/ structures. This is only one of the
possible and indicative way to classify monetisation models and is not to be treated as
prescribed/ formal categorization of monetisation models.
In practical application, adoption of one or the other category of models would depend
upon various factors viz. asset profile, objectives for monetisation, expectations of sponsor
and investors etc. The most optimal or selected model, could hence very well be one
of the above or a hybrid structure (having features of both of the above categories) or
possibly an entirely different model.
Table 2: Indicative features of Direct Contractual mode
Transaction
Asset OR rights over such asset–Transferred to a single or a consortium of
developers and / or investors, by way of defined contractual frameworks
Consideration Upfront and/or periodic payments
Target Investor
Class
Generally, infrastructure developers, strategic investors with direct
involvement / oversight in operations
Selection modes
Through a competitive bidding process and as per prescribed guidelines
of Government
Contractual
aspects
Key performance indicators and clearly defined performance regime with
commensurate incentive or penalty mechanisms, suitable exit provisions,
termination and force majeure provisions
Prevalent
Structures
PPP concessions
Table 3: Indicative features of Structured Financing Instruments
Transaction
Partnership interest in the asset OR rights over such assets, granted to a
pool of investors (under a capital market based instrument or otherwise)
Consideration Generally Upfront
Target Investor
Class
— Institutional investors such as sovereign wealth funds, global/domestic
insurance funds, pension funds
— Retail investors
Selection modes Public listing or private placement or other such mechanisms
Prevalent
Structures
Infrastructure Investment Trust (InvIT), Real Estate Investment Trust (REIT),
Asset-back securitisation (ABS)
15Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 2.4 DIRECT CONTRACTUAL MODELS – BROWNFIELD PPP
CONCESSIONS
In the past, brownfield models have largely been focussed as management contracts –
where the obligation to provide service remains with the public authority, but the day-
to-day management of the asset is vested with the private sector. These are contractual
arrangements, with duration of typically 3-5 years – where the private sector entity is
responsible for the O&M of a part or the whole of the asset/ facility or service.
Brownfield PPP models, on the other hand, aim at roping in private sector partner for end-
to-end operation and maintenance (O&M), provision of service to users and augmentation
of asset as necessary. Various potential models for such brownfield PPP of existing
infrastructure assets owned by public sector entities/line ministries/ statutory authorities
include:
Operate Maintain Transfer (OMT) Operate Maintain Develop (OMD)
Brownfield Public Private Partnership Concessions
Toll Operate Transfer (TOT)
in Roads
Operation Management
Development Agreement
(OMDA) in Airports
Model
Adopted as
Figure 11: Brownfield PPP Models
2.4.1 Operate–Maintain-Transfer Concession
The fundamental principle under the model is to engage private sector partner for
undertaking operations and maintenance of projects. This presupposes that construction
works have been completed by the asset owner/ government and the project is amenable
to immediate revenue collection. As the existing project has established demand/ traffic
revenue streams the project structure does not suffer from volatility or unmanageable
commercial risks.
From the perspective of bidders, hence, the future revenue potential can be assessed
with a fair degree of certainty. Which enables the asset owner to be able to monetise the
project for an upfront/ periodic consideration (in form of premium/ revenue share). This
not just ensures cash inflows to the public asset owner, but also relieves it of the financial
and capacity commitments towards operations and maintenance of the project, thereby
reducing expenditure or budgetary support requirement. This is necessary for financial
and operational bandwidth to public entities for implementation of greenfield projects,
as also higher commercial and operational efficiency.
OMT contracts have seen strong impetus in road sector in India. OMT contracts are a
combination of a tolling contract and a contract for operations & maintenance. Between
16Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 2009-10 and 2014-15, NHAI has awarded a total of around 2,400 km of National Highways
to be maintained on OMT basis.
27
Figure 12: OMT Broad Structure
Table 4: Key Terms of an OMT Concession
Key Requirement
Operational asset, preferably with one complete cycle/ year of
operations
Potential Projects
Projects newly constructed and commissioned by the public asset
owner through its own funds (EPC etc.) OR
Project originally tendered out through PPP modes and for which have
concession period is complete or termination has occurred
28
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, however, depending on the asset category.
Longer concession periods with pre-defined terms of augmentation
preferable
29
Consideration
Upfront or Annual Premium (Fixed OR in form of revenue share)
Variation of model where an upfront value is bid and paid by
Concessionaire is TOT
30
Investor Class
Strategic investors or Infrastructure developer with direct involvement /
oversight in operations
Selection
Through competitive bidding process and as per prescribed guidelines
of Government
Other Terms Standard terms as in case of PPP Projects
27 CRISIL report on ‘Way forward for OMT contracts’ 2016
28 Subject to asset being suitable for operations and resolution of ensuing legal conflict (if any)
29 Major augmentation or development obligations are usually not covered under these Projects. If, however,
required, at a later stage the same may be under EPC mode and funded by the Authority. In case the
same is pre-specified and is to be funded by the concessionaire, present value of such expenditure will
be reduced from the upfront consideration to the Authority.
30 Toll Operate Transfer model has been discussed as a sub-type
17Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 2.4.1.1 Toll Operate Transfer
Toll Operate Transfer (TOT) is a variant of the OMT model, recently adopted in roads
sector, where consideration paid to the Authority is in form of an upfront premium. This
is one of the key models for monetisation successfully employed in the roads sector in
India both by Central and State entities. Ministry of Road Transport and Highways (MoRTH)
introduced the TOT concession framework in 2016 for monetisation of road assets portfolio
by National Highways Authority of India (NHAI) to long-term investors.
Toll Operate Transfer (TOT) Model
Ensures efficient management of public funded and operational national
highway projects through structured contractual partnerships with defined
KPIs and O&M standards
Provides upfront proceeds for ploughing back into greenfield national
highway development
The TOT model primarily entails securitization of the toll receivables by collecting an
upfront concession fee from the selected bidder and determined through a transparent
competitive bidding mechanism. The structure involves 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.
Till date, five rounds of TOT have been undertaken covering a stretch of 2395 km, out of
which 3 rounds have been completed – Bundle 1, Bundle 3 and Bundle 5. NHAI has raised
~Rs. 17,000 crores across these three rounds of TOT entailing toll road assets of ~1400 km.
Table 5: TOT bundles bid out by NHAI till date
S.No BundleDateLengthValue
1 TOT Bundle 1 Aug 2018 682 kmRs. 9,681 crores
2 TOT Bundle 2 Feb 2019 586 kmBid cancelled
3 TOT Bundle 3 Nov 2019 566 kmRs. 5,011 crores
4 TOT Bundle 4 Sep 2020 401 km Bid cancelled
5 TOT Bundle 5A-1 Jan 2021 54 kmRs. 1,011 crores
31
6 TOT Bundle 5A-2 Jan 2021 106 kmRs. 1,251 crores
24
Certain state government entities have also adopted the TOT model for monetising state
toll roads.
31 Bids undertaken with undisclosed IECV
18Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook In June 2020, Maharashtra State Road
Development Corporation (MSRDC)
awarded the tolling rights of Mumbai
Pune Expressway and old Mumbai-Pune
corridor (NH-48) to IRB Infrastructure
Developers for a total consideration
of Rs 8,262 crore comprising upfront
payment of Rs 6,500 crore and the
balance in staggered instalments over
a period of three years.
CASE STUDY – TOT BUNDLE 1
The first TOT model was bid out in 2018, and comprised nine highway stretches
aggregating to ~682 km in Andhra Pradesh and Gujarat, ensuring geographic
diversification. Six of these were in AP and are part of the NH-5 of the Golden
Quadrilateral connecting Kolkata and Chennai. They had a strong traffic potential given
the presence of ports, industrial clusters and consumption centres in the project vicinity.
TOT-1 toll roads had a higher share of commercial traffic at 85% vis-à-vis corresponding
national average of 75%. As against NHAI’s Initial Estimated Concession Value (IECV)
of Rs 6,258 crore, the winning bid was of Rs 9,682 crore. NHAI utilised the monetised
proceeds for funding new road projects under Bharatmala program thus diversifying
its conventional funding sources.
Key takeaways
A. Diversified asset mix, quality of underlying road assets and tenor of the
concession period are vital to attract investor interest
The location of the projects i.e. Andhra Pradesh and Gujarat, along with the overall
project influence area, and potential traffic growth played a key role in getting a
winning bid equal to almost 1.5 times the reserve price. Other contributing factors
included long concession period of 30 years, transparency in availability of historical
traffic data of project roads.
19Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook B. Adequate project preparation and key changes in the regulatory framework
have enhanced investor appetite
Detailed study and consultation were undertaken prior to structuring and rolling out the
first TOT transaction by NHAI. Also, before awarding the bundle of projects, authority
had conducted robust due diligence of the bundled projects through drone videos
and network survey vehicles for ascertaining asset condition of underlying road assets
along with current traffic patterns
2.4.2 Operate–Maintain-Develop Concession
Under the Operate Maintain and Develop structure, an asset which is operational but due
for augmentation is handed over to the private party for augmentation and O&M over
the concession period. Usually, the operations of such asset remain uninterrupted with
augmentation undertaken while the asset is operational.
The private sector raises finance on the strength of the existing assets and / or obtains
project financing along with equity contribution for undertaking such augmentation. The
private sector pays an upfront or an annual consideration (in form of a premium and / or
revenue share) and earns its returns through revenues from upgraded asset.
Figure 13: OMD Structure
Table 6: Key Terms of an OMD Concession
Key Requirement Operational asset which is due for augmentation
Potential Projects
Projects constructed and completed by public asset owner through
their own funds OR
Project originally tendered out through PPP modes and for which
concession period is complete
32
Primary Obligations
— Augmentation along with ongoing and future Operations and
Maintenance of assets;
— Provide service to users against a pre-determined/ regulated or
market-based fee;
32 Terminated projects due for augmentation may also be considered subject to resolution of ensuing legal
conflict (if any)
20Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook Concession Period 25 years or more, however, depending on the asset category.
Consideration
Annual Premium (Fixed or in form of revenue share)
And/ OR Upfront Premium
33
Investor Class Strategic investors with direct or active involvement in operations
Selection
Through a competitive bidding process and as per prescribed
guidelines of Government
Other Terms Standard terms as in case of PPP Projects
A similar structure is the Rehabilitate-Operate-Maintain-Transfer (ROMT) where an existing
asset ideally needs to be first upgraded/augmented before the operations and collection
of the revenue can be resumed. Here as well, the concession terms are generally similar to
OMD contracts with consideration for netting off the cost of rehabilitation to the Authority.
CASE STUDY: OMDA IN AIRPORT SECTOR
The development of airports through
PPP mode started in 2006 with the
Airports Authority of India (AAI) airports
at Delhi and Mumbai. The contracts were
structured as Operation, Management
and Development Agreement which
have helped create a world class airport
infrastructure.
AAI tendered out the concession of Delhi
International Airport for augmentation
& O&M with revenue share as the bid
parameter. In order to enhance the
commercial attractiveness and viability
of the project, city side real estate has
been clubbed along with. The concession
period is 30 years (renewal after 30
years) with transfer at end of period.
The Project has been completed at a
total cost of Rs 12,500 crore enabling
augmentation and long-term operation
of airport with no additional cost to AAI.
33 As consideration for value of assets received – This may be pre-determined as in case of recent leasing
of six airports (2019) or be bid parameter (with pre-defined revenue share)
21Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook Leasing of Six Airports (2019)
Airports Authority of India (AAI) undertook development of 6 brownfield airports–
Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram and Mangalore–under
PPP mode in 2019.
The scope of work for the concessionaire entailed capacity expansion of the airports
in a phased manner along with ongoing and future O&M. It also included development,
operation and maintenance of city-side (creating infrastructure facilities adjacent to
airports like hotels, restaurants, retail shops, etc.)
34
. The concession period of these
airports was 50 years with no extension provision. Thereafter, the assets will be
handed back to the Authority i.e. AAI. The concession also envisaged a State Support
Agreement with respective state governments. The State Support Agreement is aimed
at enabling support related to removing encroachments, security and protection of
property, clearance, and utilities (like power, water supply services).
The bid parameter for the project was ‘Per Passenger Fee’ with the concessionaire
required to pay monthly fee equivalent to the aggregate of domestic user fee (product
of per passenger fee for domestic passenger and domestic passenger throughput) and
international user fee (product of per passenger fee for international passenger
35
and
international passenger throughput).
Various funds and strategic investors participated in the bid. The financial bids of the
qualified bidders for Project were opened in February 2019. The bid process enabled
receipt of approximately Rs 900 crore upfront to AAI with no expenditure and capacity
commitment over the next 50 years.
36
2.4.3 Other PPP models
The critical factor that defines an “asset monetisation” is the nature of the asset. If the
underlying asset is an active revenue generating asset with potential for utilization in a
manner which ensures higher accruals / grant savings to the authority then it may be
considered under the category of asset monetisation.
A key example is the proposed private participation initiatives in railways where the railway
station redevelopment projects (Design Build Finance Operate Transfer) are being rolled
34 The concessionaire has the right to lease/ sub-lease the land/ assets towards city-side development
35 Twice of domestic passenger fee as per terms of bidding
36 Additional quantum of funds received by AAI during FY 2021
22Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook out leveraging the existing infrastructure available with railways viz. track, signalling,
stations etc. Such assets, on account of their brownfield nature and/ or existing traffic,
allow reduced upfront investment for the concessionaire (in certain cases revenue potential
from day one) thereby ensuring higher viability. This, in turn results in higher upfront or
periodic consideration to the authority or saving of viability grant. Since such enhanced
value/ accruals to authority is reflective of the value of capital invested in the existing
asset, such transactions are considered under the asset monetisation framework.
2.5 LONG TERM LEASE
A lease is an agreement whereby the lessor confers to the lessee the right to use an asset
for an agreed period of time in return for a payment or series of payments.
While principally akin to brownfield PPP models, the primary difference in case of long-
term lease models lies in the nature of assets leased out and/or use of such assets. Long
term lease models can be adopted in case of sectors such as telecom etc. where the
license to provide an infrastructure service is already available with a private party and
the unused/sub-optimally utilised asset of public sector entity is leased out to the such
private sector party for providing service under its own license. Alternatively, such models
can be adopted in cases where an infrastructure asset viz. mine etc. is allowed for captive
usage by private sector players.
Such models can also be used for achieving asset light balance sheets or for innovative
financing
37
by public sector entities. Where the infrastructure asset or right to operate,
such assets are transferred to a private sector entity for a pre-determined period in lieu
of an upfront consideration. The public sector entity then uses such assets for providing
service to public against periodic payments. Such leases are executed on long-term basis
usually in lieu of a fixed upfront consideration or fixed periodic consideration with annual
escalation.
Long term Lease models may also be employed for urban land based assets such as
hospitality assets or bus terminals. At times, this model may also be applied in combination
with other PPP models such as Rehabilitate-Operate-Maintain–Transfer (ROMT). In such
cases, however, the contract period may be longer, and the private sector may be required
to make additional investments. The asset transfer under such a lease agreement may
happen with or without restrictions on function or usage.
Scenarios
A. Assets of public entity leased out for providing service under its own
license
Right/ License to provide an infrastructure service already available with
a private party;
B. Leasing of assets for Captive Use
C. Leasing for achieving asset light balance sheets
Figure 14: Long term Lease Models
37 Similar to sale and lease back, however, with no provision for sale of asset
23Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook Table 7: Key Features of Lease
Lease Period 10 years or more, however, depending on the asset category.
Consideration
Fixed upfront consideration OR
Annual payments with escalation
Investor Class
Existing Licensees (Scenario A); Captive Users (Scenario B) Financial
investors (Scenario C)
Potential Sectors Power, Telecom, Pipeline, Ports, Mining etc.
Benefits of such leasing transaction to the public sector entity include upfront consideration
against unused or sub-optimally utilised assets along with no liability towards regular
maintenance. While for private sector it is largely the availability of an operational asset
without any construction risks and faster roll-out of services.
Leasing – Tower assets in Telecom sector
Contracts between tower infrastructure companies and telecom operators (tenants),
which clearly spell out the overall tower requirements of the tenants, the pricing terms,
and other binding terms and conditions between the two parties. It is generally referred
to as passive infrastructure sharing and includes elements like tower space for mounting
antennas for a BTS and also associated passive equipment. BSNL and MTNL have been
renting out towers and mobile sites, respectively, to private players against rentals.
2.6 INFRASTRUCTURE INVESTMENT TRUST
Infrastructure Investment Trust (InvIT) is an innovative trust-based financial instrument,
which enables participation in infrastructure financing through a stable and liquid
instrument. InvITs provide an opportunity to invest in infrastructure assets with predictable
cash flows and dividends. InvITs have been introduced in India in 2014 and are employed
by infrastructure asset owners to pool in money from a diverse set of investors against
pay-out of cash flow generated by the assets on a periodic basis.
Under an InvIT transaction, infrastructure asset owners transfer multiple revenue generating
asset
38
SPVs through holdco or otherwise to a trust which then issues units to investors for
raising money. The upfront money so raised is utilized by the developers for creation of
new greenfield assets as also for repayment of debt which enables availability of capital
with lenders for investment/ lending to new projects. The investors, in lieu of invested
money, receive a share of Net Distributable Cash Flows (NDCF – similar to the dividend
pay-outs) on a periodic basis, commensurate with their unit holding in the Trust. Improved
yields for the unit holders can be insured, by adding revenue-generating projects and
expanding its portfolio.
The structure of a typical InvIT transaction and the fund flow across agencies is represented
in the figure below.
38 Potential to add under construction assets in line with SEBI regulations
24Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook Figure 15: InvIT transaction – Illustrative structure
2.6.1 Key stakeholders
Under this structure, the public asset owner (‘Sponsor’) creates an independent trust and
transfers the ownership/ rights of the public assets to the same. Investors (‘Unit Holders’)
are the beneficiaries
39
of the trust.
The key stakeholders under the InvIT structure include:
aThe Sponsor – The sponsor is the public asset owner (for public-owned assets)
which sets up the InvIT with the objective to monetise its assets. In case of
PPP projects, the sponsor is the infrastructure developer or a SPV holding the
concession agreement.
aThe Trustee – The trustee means a person who holds the InvIT assets in trust for
the benefit of the unit holders, in accordance with extant regulations.
aThe Unit holders – The unit holders are the investors who subscribe to the units
of the InvIT. The unit holders are the eventual beneficiaries of the asset.
aThe Investment manager – The investment manager is responsible for taking
investment decisions in the interest of unit holders including addition of new
assets / sale of existing assets, leverage etc.
aThe Project Manager – The project manager brings in the operational expertise
of managing the infrastructure assets as per the interest of the unit holders.
Other key stakeholders incidental to the InvIT registration and issuance process include
valuer, auditor(s), merchant banker(s), registrar & transfer agent, banks, registrar to the
issue, credit rating agencies, and depository participants.
39 As per the Indian Trust Act, 1882 – the person for whose benefit the confidence is accepted is called the
“beneficiary”
25Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook Table 8: Key Requirements/ Terms of an InvIT
Key
Requirement
— Operational Infrastructure assets, with at least one year of operations
for Public InvIT
40
— Eligible sub-sectors as per Harmonised Master list of infrastructure sub-
sectors of MoF
Types of InvIT
Public
41
Open for participation by all kinds of investors including retail; and
Private: Restricted for participation by Qualified Institutional Buyers and
bodies corporate
Minimum Value Assets under InvIT: Rs. 500 crores (Initial offer size: At least Rs 250 crore)
Consideration Upfront Consideration against subscription of InvIT units
Investor Class
Financial investors looking for stable yields; sovereign wealth funds and
global pension funds, insurance funds, retail investors etc.
Investor
Payment
Not less than 90% of the net distributable cash flows of the InvIT
distributed to unit holders
Figure 16: Key Benefits of InvIT
InvITs – Similar instruments globally
42
Globally private institutional funds have complemented debt funds in financing
infrastructure investment. There has been a global consensus on the potential for
tapping large institutional investors (including pension funds, sovereign wealth funds
etc.) as well as retail investors towards infrastructure asset class, especially with lower-
risk levels (brownfield assets). Two specific instruments seen in the USA which have
been fairly successful in tapping institutional investors into infrastructure assets are:
Yieldcos and Master Limited Partnerships (MLPs).
40 Potential to add under construction assets in line with SEBI regulations; For private InvITs non-operational
assets, subject to compliance with SEBI regulations may be considered
41 Minimum number of investors is 20; If number of participants is more than 1000, then automatically
public issue
42 The Evolution of the YieldCos Structure in the United States, Mauricio Franco Mitidieri April 13, 2020;
Sean T. Wheeler Latham & Watkins MLP Practice
26Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 2.6.2 InvIT Process
InvITs are established are trusts under the Indian Trust Act, 1882 and regulated under
the SEBI (Infrastructure Investment Trusts) Regulations, 2014. Detailed regulations are
discussed in Section 6.
The steps in a typical InvIT transaction are represented in the figure below.
Figure 17: InvIT transaction – Illustrative steps
2.6.3 InvIT transactions in India
India has seen a number of InvIT transactions over the last 4-5 years. The total Assets
Under Management (AUM) across the 8 active InvITs
43
is around Rs. ~1.4 lakh crore. Bulk of
the assets are under toll roads (rs. 47,500 crore), followed by telecom (rs. 42,000 crore),
gas pipeline (rs. 16,500 crore) and power transmission (rs. 14,000 crore).
Since the introduction of InvIT regulations, bulk of the InvIT’s have been sponsored by
private sector infrastructure developers. Recently, public sector asset owners such as
Powergrid and NHAI have initiated greater adoption of the instrument. The table below
provides the list of InvIT transactions since its introduction
Table 9: Key InvIT transactions
S.No.InvITSector
Public/
Private
Listing
month
Assets under
Management
(Rs. crore)
1 IRB InvIT Fund – IRB
Infrastructure Developers
Toll roads PublicMay 2017 6,500
2 India Grid Trust of Sterlite
Power
Transmission Public June
2017
15,000
43 Excluding the first public sector InvIT of Powergrid.
27Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook S.No.InvITSector
Public/
Private
Listing
month
Assets under
Management
(Rs. crore)
3 IndInfravit Trust – L&T IDPL Roads Private June
2018
10,500
4 India Infrastructure Trust –
Brookfield
Gas pipeline Private March
2019
14,500
5 Oriental Infra Trust – Oriental
Structural Engineering Pvt. Ltd.
Toll roads Private June
2019
11,000
6 IRB Infrastructure Trust Toll roads Private Feb
2020
22,500
7 Tower infrastructure Trust –
Reliance & Brookfield
Telecom
towers
Private Sep
2020
42,000
8 Digital Fibre Infrastructure TrustFibre Optic Private Oct
2020
1,500
9 Powergrid InvITPower
Transmission
PublicMay 2021 7,800
The first InvIT of a public sector entity, PowerGrid has been recently launched in the
market. The issue has monetised assets worth ~Rs 7,800 crore and Powergrid has divested
85% of its unit holding in the InvIT. The issue has been listed at premium. National Highways
Authority of India is also in advanced stage of raising funds through an InvIT issue expected
shortly.
CASE STUDY – INDIGRID INVIT
44
IndiGrid InvIT was established in October 2016 by Sterlite Power Grid Ventures Ltd
(SPGVL) to monetise two transmission assets – Bhopal Dhule Transmission Company
Limited (BDTCL) and Jabalpur Transmission Company Limited (JTCL). The assets have
established long term contracts, with low operating risks and stable cashflows.
IndiGrid raised around Rs. 1,012 crores from 19 anchor investors. This helped improve
retail participation in the InvIT and also ensured stable price levels.
44 Information collated based on filings in the Stock Exchanges
28Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook Key takeaways
a. Diversified Asset Mix: The Trust has a diversified asset portfolio comprising 12
inter-state transmission assets across 15 states and 1 Union Territory. These assets
have an availability-based payment mechanism, with a credible counterparty –
PGCIL with average availability of greater than 99.5% (from COD till Dec 31, 2020).
b. Addition of assets: Starting with 2 project assets with an AUM of Rs. ~3,700
crores in 2017, the InvIT currently holds around 15 project assets with an aggregate
AUM of Rs. ~15,000 crores as of Q3 2021. The increase in asset portfolio over
time has ensured greater market interest and improved liquidity of InvIT. Active
role of Investor and co-sponsor, KKR in management and Governance of InvIT
and investment decisions has played a critical in growth journey of the InvIT and
value appreciation.
c. Distribution per Unit (DPU) and Distribution yield over the period from FY 2018
to FY 2020 for InvIT is as shown below
2.7 REAL ESTATE INVESTMENT TRUST
Real estate assets are capital-intensive assets which require substantial up-fronting of
investments by the developer. While the land and building based debt products have been
available, this does not provide for effective risk-sharing and cost-effective financing for
the developer. Real Estate Investment Trusts (REIT) are similar in structure to InvITs. As
against InvIT which is unique to the Indian context, REIT structures have seen traction
across the globe. The REIT’s origin dates back to the 1960s in US. The objective of the
REIT structure is to broad-base options for the developers towards expanding the sources
of funds.
Only real estate projects
45
are eligible under this structure. The regulations also stipulate
that 51% of the consolidated revenues of the REIT, holding company and SPV, should arise
45 “Real estate” or “property” means land and any permanently attached improvements to it, whether
leasehold or freehold and includes buildings, sheds, garages, fences, fittings, fixtures, warehouses, car
parks, etc. and any other assets incidental to the ownership of real estate but does not include mortgage.
29Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook from rental, leasing and letting real estate assets or any other income incidental to the
leasing of such assets. However, exceptions have been made with respect to (i) hotels,
hospitals and convention centres forming part of composite real estate projects, whether
rent generating or income generating; and (ii) common infrastructure for composite real
estate projects, industrial parks and SEZs.
The structure of a typical REIT transaction and the fund flow across agencies is represented
in the figure below.
Sponsors
TrusteeREIT
Unit Holders
Real estate assests
Unit holders’ cashflow to REIT
Funds infused at the time of issue
REIT’ cashflow to unit holders
• Divided
• Interest on REIT loans
• Capital repayment/buyback of
units
REIT’ cashflow to unit SPVs• REIT loans for SPV loan
prepayment
• Meeting SPVs’other cash
requirements - reserve creation,
etc.
SPVs’ cashflow to REIT
• Dividdend
• Interest on REIT loans
• Repayment of REIT loans
• Share buyback of SPVs
SPVSPV(V)
Holdco
Manager
Figure 18: REIT transaction – Illustrative structure
Real Estate (Regulation and Development) Act has brought in sizeable level of accountability
and transparency in the segment. In this context, REIT structure has been able to provide
an effective and robust corporate governance framework with clearly delineated roles and
responsibilities for key stakeholders such as sponsor, investment manager, etc. and the
transparency on the revenue/ rent collections.
Table 10: Key Requirements/ Terms of an REIT
Key Requirement
Revenues arise from rental, leasing and letting real estate assets or
any other income incidental to the leasing of such assets
Mandatory Listing
Types of InvIT Public (Open for participation by all kinds of investors including retail)
Consideration Upfront Consideration against subscription of REIT units
Investor Class
Financial investors looking for stable yields; sovereign wealth funds and
global pension funds, insurance funds, retail investors etc.
Investor Payment
Not less than 90% of the net distributable cash flows of the REIT
distributed to unit holders
30Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook Potential Assets
Railway warehouses/ good sheds
Multifunctional complexes
City-side development for Airports
Commercial development on Municipal land
Commercial development along the toll road stretches
Railway stations’ commercial development etc.
Public sector entities in India sit on an inventory of under-utilised land assets in some
of the high value real estate zones, which may be freehold land or underutilised land
parcels. The REIT platform provides an opportunity to capture value from these assets
by allowing commercial development. The instrument provides an opportunity for real
estate asset owners to raise money upfront by transferring the revenue generating real
estate assets to the trust. The investors receive the net distributable cash flows generated
by the infrastructure assets.
Figure 19: Benefits and Limitations of REIT
REITs are established as trusts under the Indian Trust Act, 1882 and regulated under the
SEBI (Real Estate Investment Trusts) Regulations, 2014. Detailed regulations are discussed
in Section 6.
Issuance process of a REIT is similar to an InvIT and is discussed in detail in Section 6.
REITs – Similar instruments globally
REITs have been active infrastructure instruments for real estate financing globally.
They started in the USA in the early 1960s and currently is present across 40 countries
across the world. REITs globally invest in the majority of real estate property types,
including offices, apartment buildings, warehouses, retail centres, medical facilities,
data centres, cell towers, infrastructure and hotels.
31Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook List of countries with REITs and the year of adoption
46
Snapshot of the US REIT market:
It is estimated that there are more than 1100 REITs in US
47
, out of which 225 REITs
are public REITs registered with the SEC. As of December 2019, REITs in the US own
more than $3.5 trillion of gross real estate assets and 5.16 lakh properties
48
. REITs may
also be categorized as public REIT (in case of shares registered with Securities and
Exchange Commission) or private REITs.
REITs in US can be categorized based on nature of risk exposure to the underlying
asset as follows: Equity REITs and Mortgage REITs (mREITs). Equity REITs own and
operate real estate assets while the mREITs invest in mortgages and mortgage-
backed securities, providing financing for residential and commercial properties. REITs
performance have largely been better than the overall stock market performance.
The market capitalization of REITs (and number of publicly traded REITs in bracket)
in select countries is as follows
49
:
JurisdictionValueNumber
United StatesUS$ 1232 billion194
SingaporeUS$ 76 billion44
JapanUS$ 148 billion62
Hong KongUS$ 35 billion11
IndiaUS$ 4 billion1
MalaysiaUS$ 9 billion18
46 https://www.reit.com/investing/global-real-estate-investment
47 Based on tax return filings by Internal Revenue Service;
48 Only public REITs
49 https://www.crisil.com/content/dam/crisil/our-analysis/reports/Ratings/documents/2019/october/
indias-reit-opportunity.PDF (Aug, 2019)
32Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 2.7.1 REIT transactions in India
India has seen 3 REIT transactions since the regulations were introduced. The transactions
have been largely in the private sector space. With a significant inventory of real estate
assets with strong development potential, REITs can play a major role in transforming
public sector financing landscape. The table below provides the list of REIT transactions
since its introduction.
Table 11: REIT transactions in India
S.No. REITSector
Public/
Private
Listing
month
Assets under
Management
(Rs. crore)
1 Embassy REITOffice parks Public April 2019 33,000
2 Mindspace REIT Office parks Public Aug 2020 22,500
3 Brookfield India REIT Office parks Public Feb 2021 11,000
Total66,500
CASE STUDY – MINDSPACE REIT
50
Mindspace REIT was established on November 18, 2019. The REIT holds 10 real estate
assets through 8 SPVs. Mindspace Business Parks REIT owns office portfolio located
in four key office markets of India – Mumbai (41%), Hyderabad (39%), Pune (17%) and
Chennai (3%). Portfolio has total leasable area of 29.5 million square feet (msf) and is
one of the largest grade-A office portfolios in India. Portfolio comprises 23.0 msf of
completed area, 2.8 msf of under construction area and 3.6 msf of future dvelopment
area, as of March 31, 2020.
Key takeaways
1. Counterparty profile for the REIT assets
The tenants are largely MNC firms from diversified sectors which helped bring in better
realisations and lower volatility of cashflows. The average rent for the assets was around
Rs. 60 per sq. ft. per month. Hence, the selection of the assets for REIT needs to be backed
by adequate assessment of counterparty risks that the REIT assets might get exposed
to and also needs to be backed by risk mitigation measures to ensure investor comfort.
50 Information based on fillings in the Stock Exchanges
33Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 2. Anchor investors and strategic investors during public issue;
Presence of an experienced real estate player i.e Blackstone group in this case, with
experience in managing similar assets can potentially bring in large-scale investors like
pension funds, insurance funds etc.
2.8 FACTORS DETERMINING CHOICE OF MODEL
The key decision-making criteria for monetisation include:
i. Extent of fund raised and potential for upfront receipt for the public sector
agency
ii. Tax efficiency and liquidity for investors and target investor class
iii. Operational control for the public sector agency
iv. Valuation potential
It is seen that the capital market instruments have the potential to bring in better value
considerations, while the PPP concession may be suitable in sectors where the private
sector brings in improved standards for operation and maintenance with service to users
under a defined framework.
34Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 3
Asset Monetisation
Experience: India
and Beyond
The section delves into the Asset
Monetisation experience, globally
and in India, its key features,
guiding frameworks,
factors for success
and case studies
Asset Monetisation Experience: India and Beyond 35 Infrastructure investment requirement, globally, has been estimated at USD 94 trillion
during the period 2016 to 2040
51
. Of which, ~50% alone is required in Asia (with China,
India and Japan being major contributors). While governments lead the initiative of
meeting the massive infrastructure deficit, it is widely accepted that governments alone
cannot fund this level of infrastructure investment requirement. In order to bridge this
infrastructure deficit, globally public sector has explored various options including, but not
limited to public funding, private partnerships/ private finance initiatives, value capture,
debt financing and public asset recycling.
Asset recycling is considered as an alternative strategy where there is a considerable public
asset base–comprising of mature brownfield or surplus or under-utilized assets–which is
leveraged for raising upfront capital for investment in new assets or for revitalization of
existing assets. Asset recycling is being increasingly recognized as a means of alleviating
budget pressure and delivering new infrastructure and services.
It simultaneously enables private sector investors avoid risks associated with the construction
phase. There is already an established track record of investment by institutional investors
and funds in mature economic infrastructure projects such as toll roads, ports and airports
in North America, Europe and Australia. More recently, such investments have been seen
in Asia-Pacific region as well.
3.1 AUSTRALIA’S ASSET RECYCLING INITIATIVE (ARI)
The concept of asset recycling has been widely implemented in Australia through the
Asset Recycling Initiative (ARI) of the federal government.
3.1.1 Need for Asset Recycling in Australia
Australian federal government in the year 2013, directed the Productivity Commission (PC)
to commence a thorough examination of infrastructure costs and financing in Australia with
focus on ways to improve decision-making and implementation processes. The objective
was to facilitate cost reduction in public infrastructure projects and recommendations
on policy measures including any non-legislative approaches, which would help ensure
effective delivery of infrastructure services over both the short and long term.
The PC findings reported an increasing caution by private investors about investing in
public infrastructure projects owing to factors such as long drawn procurement processes
with ‘patchy’ deal flow. At the same time, owing to a federal structure, it is the states and
local governments that had much of the planning, environmental and regulatory controls.
In this backdrop, the government, during the 2014-15 budget, announced the Infrastructure
Growth Package (IGP) which was s a ten-year vision of infrastructure investment in the
country. IGP comprised of three key components, the Asset Recycling Initiative, new
investments, and the Western Sydney Infrastructure Plan. The Asset Recycling Initiative
(ARI, 2014) which was aimed at encouraging states to recycle assets and utilise the
sale proceeds into new productivity-enhancing infrastructure by encouraging private
companies to fund and run public infrastructure.
51 Global Infrastructure Outlook 2017 published by Oxford Economics
36Asset Monetisation Experience: India and Beyond Volume I: Monetisation Guidebook 3.1.2 Key features of Asset Recycling Initiative (ARI)
The ARI provided monetary incentive for states to engage in asset recycling to boost
infrastructure development. It envisaged a sum of 15 percent of the estimated proceeds
from monetisation of an asset (through sale or lease) to be paid to a state by the federal
government if the proceeds are reinvested in new infrastructure. The ARI was designed as
a five-year program from 2014- 2019, and the funding was allocated to specific proposals
on a first-come, first-serve basis.
States, in agreement with the federal government, decided on the specific assets to
be monetised and on the additional infrastructure that money will be recycled into.
The initiative also envisaged a definite timeline for completion of sale of the asset and
commencement of construction of the additional infrastructure. The federal government’s
financial contribution was managed through the Asset Recycling Fund (ARF), which was
used to make payments to states under the IGP.
Figure 20: Illustrative ARI process
3.1.3 Assets covered under ARI and Investor response
Overall, three of Australia’s eight states and territories participated in the scheme. By
2018, 12 major public assets were rolled out under ARI across New South Wales, Victoria,
the Northern Territory, South Australia and the Australian Capital Territory. Approximately,
AUD 3 billion in incentive payments were paid to participating states and territories over
the life of the scheme. This helped in unlocking over USD 17 billion in new infrastructure
development across Australia. The initiative helped in enhanced investments on new
transportation infrastructure by states through sale or lease of assets. Asset classes such
as ports, electricity generation, transmission and distribution and roads were leased / sold.
Assets such as land title offices, lottery offices and dilapidated public housing were also
taken up with governments, redeploying the money into new infrastructure in partnership
with the private sector.
37Asset Monetisation Experience: India and Beyond Volume I: Monetisation Guidebook Figure 21: Major public assets monetised under the ARI
52
Figure 22: Notable investors participating in Australia’s Asset Recycling Initiative
53
52 Values in million Australian dollars – Source: Australian Asset Recycling Initiative website
53 Values in million Australian dollars – Source: Australian Asset Recycling Initiative website
38Asset Monetisation Experience: India and Beyond Volume I: Monetisation Guidebook CASE STUDY – PORT OF MELBOURNE
The Port of Melbourne occupies 510 hectares of land to the west and south west
of the Melbourne CBD, spanning both banks of the Yarra River from Bolte Bridge
to the river mouth. It handles around one-third of Australia’s container trade, with
operations generating total economic benefits worth approximately AUD 7.5 billion to
the national economy. During 2018-19, around 3 million twenty-foot-equivalent units
(TEU) of containers were handled by the port ( equivalent to 75 million revenue tonnes).
According to Port of Melbourne’s 2050 ‘Port Development Strategy’ released in 2019
the total container trade volumes have been forecasted to grow by 3.5% per annum
over the long term (from 3 million TEU in 2019 to around 8.9 million TEU by 2050).
The port, previously operated as a Victorian Government entity. However, in 2016,
under the Asset Recycling Initiative, a 50-year lease of the port was awarded by the
Victorian Government to a private consortium comprising Future Fund, QIC, OMERS
and Global Infrastructure Partners (GIP), for around AUD 9.7 billion. One of the key
considerations for the lease structure was maintaining and enhancing the Port of
Melbourne’s competitiveness and efficiency particularly given the critical role that the
port plays in import and export markets.
Port of Melbourne operates within a landlord model and is responsible for asset
maintenance, assessment and repair. Port operations are carried out by third party
operators and service providers. These include stevedores, provedores, pilotage, towage
and mooring services, and services relating to shipping operations. Additionally, in
order to ensure alignment with growth projections, the port has undertaken investment
in on-port rail infrastructure to reduce dependence on road transport in the freight
supply chain. It has undertaken community engagement activities and comprehensive
environmental compliance activities that protect and enhance land and marine zones
within the port’s surroundings.
Key Takeaways:
aPort’s trade-based tariff increases set under a stable, transparent regulatory
regime and monitored by an external independent body, provide high pricing
certainty to the port and users;
aPort also secured long-term lease agreements, which provide unregulated
and stable cash flow of around one-third of total revenue. Most leases entailed
fixed increase at greater of CPI+1.5% or 4.0%; and
aContinued investment by state in supporting transportation infrastructure
such as rail link help in improving the port’s connectivity and competitiveness
39Asset Monetisation Experience: India and Beyond Volume I: Monetisation Guidebook 3.1.4 Key takeaways from ARI
Consensus of state and federal government over asset sale/lease: A formal consensus
mechanism for sale/lease of assets under the ARI was ensured between the federal and
state government.
As per the framework of the ARI scheme, the state government recommends the assets
to federal government and post approval, the asset can be brought under the ambit of
the ARI scheme.
Timebound scheme for funding: In order to ensure timeliness and to encourage
competition, the Asset Recycling Initiative window had been open for a limited period
of two years and was operated on a first come, first serve basis. Further, the bonus was
contingent upon states and territories selling and building at the same time.
Incentives to state governments: The federal government provided an additional incentive
payment aggregating to 15% of the proceeds received by the state from sale/lease of
assets. This further encouraged state government to participate in the scheme and ensure
holistic development of the country as a whole.
Commitment to invest in new infrastructure projects: Even prior to inclusion of asset
under ARI scheme, the state government is required to commit itself to invest the proceeds
in development of new infrastructure thus ensuring transparency in transaction.
3.2 INDONESIA’S LIMITED CONCESSION SCHEME (LCS)
3.2.1 Background
Government of Indonesia has recently introduced a new form of concession, i.e. Limited
Concession Scheme (“LCS”) as an alternative to the existing Public-Private Partnership
(PPP) scheme
54
.
In order to improve connectivity between its vast regions and to ensure economic growth,
Indonesia requires significant quantum of infrastructure financing. In February 2020, the
Government of Indonesia enacted an enabling regulation (Presidential Regulation No. 32 of
2020) on Infrastructure Financing through Limited Concession Rights which introduced an
alternative scheme for financing public infrastructure through utilization of existing assets,
currently being operated by the central government and/or state-owned enterprises.
3.2.2 Features of the LCS scheme
Under the LCS scheme, the private sector is proposed to be invited to operate, maintain and
expand existing assets in return for the private sector paying the government an upfront
concession fee or instituting ongoing revenue sharing schemes with the government.
These additional revenues are aimed at enabling the government to complete its massive
infrastructure programme, in particular to fund economically important, but sub-financial
54 As stipulated under Presidential Regulation No. 32/2020 on Financing of Infrastructure through Limited
Right of Utilization
40Asset Monetisation Experience: India and Beyond Volume I: Monetisation Guidebook projects, such as the Trans Sumatra Highway, as well as social infrastructure projects in
less-developed regions of Indonesia.
Eligible Infracstructure SecorsKey terms and conditions
!Transportation,
!Urban utility systems
!Telecommunication
!Electricity, Oil, Gas, Renewable
Energy
!Payment of compensation/
Up-front payment
!Amount of up-front payment
must be formulated as
owner’s estimate by the entity
undertaking LCS
!Prior to transaction, to
predetermine on how it will
reinvest the up-front payment
!Strong emphasis on hand-
back of assets
Key Criterion for assets under LCS
!Commercial operations of 2+ years
!Requires an increase efficiency of
operation
!Remaining life of assets for 10+
years
Figure 23: Key features of Indonesia’s LCS initiative
Through this regulation, private sector (including, limited liability company and foreign
business entity) will be allowed to manage and operate existing infrastructure assets,
which consist of infrastructure, namely: transportation (seaports, airports, railways and
bus terminals), toll roads, water resources, sewerage and waste management systems,
telecommunications, power plants, renewable energy, oil & gas (“LCS Assets”).
To qualify as LCS Assets, infrastructure should have been in operation for at least two
years, and the remaining life of the assets must be at least ten years. LCS Assets will be put
on list and announced to public by KPPIP, an ad-hoc committee set up by the government
to accelerate development of priority infrastructure projects in Indonesia.
Aside from benefitting from the operation of a commercial asset, private sectors
participating in LCS will also partake in the financing of new infrastructures. Private sectors
will be required to pay a premium to compensate the state or state-owned enterprises for
the grant of the limited concession. This way, the government or state-owned enterprises
are able to deploy funding for development of new infrastructure assets.
3.2.3 Benefits to the public asset owners
The scheme is expected to become an alternative funding source for infrastructure
development projects. With LCS model, the government can recycle existing operational
infrastructure assets to capitalize new development or upgrade other assets, using the
upfront money from private sector.
41Asset Monetisation Experience: India and Beyond Volume I: Monetisation Guidebook In return, the private sector is granted a concession to operate LCS Assets for certain
period of time to guarantee its return of investment. Private sector partner is proposed to
be selected through a prequalifying tender organized by the relevant authorized institution
responsible for each asset. The tender is designed to be based on the estimated value of
the upfront fee to be determined by the state’s valuer or by a qualified asset valuation
company.
The private sector granted with concession will be required to transfer the upfront fee
within 6 months after the execution of LCS agreement. Upon transfer of the asset, private
sector shall be fully responsible for the operation and maintenance of the asset, including
paying applicable tax associated with the asset.
3.3 REITS IN NON-TRADITIONAL REAL ESTATE SECTORS
Globally REIT markets have seen immense growth in recent times. The cumulative market
capitalization of REITs globally is believed to be around the USD 2 trillion level. While
USA is the largest and the oldest REIT market, the market is increasingly becoming more
global. Today, over 35 countries and regions around the world have a REIT regime in
place. Globally, 15 of the 30 largest listed real estate companies in the world are REITs,
which includes 13 U.S. REITs.
Most REITs globally operate along a straightforward business model that is by leasing
space and earning rental / leasing income on the underlying real estate, which is then
paid out to shareholders in the form of dividends. REITs typically must pay out at least
90 % of their taxable income to shareholders. The key value proposition of REITs is that
they provide all investors the chance to own valuable real estate, with an opportunity to
access dividend-based income and returns, without actually having to go out and buy,
manage or finance property.
REITs invest in a wide scope of real estate property types, including offices, apartment
buildings, warehouses, retail centres, medical facilities, data centres, cell towers,
infrastructure and hotels. Most REITs focus on a particular property type, but some
hold multiples types of properties in their portfolios. The U.S. REIT market has been
fundamentally transformed over the last three decades on the back of growth of non-
traditional real estate sectors. Newer property types, such as self-storage, health care,
cell towers, and data centres now comprise over half of the total U.S. REIT market
capitalization. These non-traditional sectors in the mature U.S. and European markets
are expected to bring the next wave of growth and the emergence of listed real estate
sectors in high-growth Asian markets.
Emerging non-traditional sectors are now being structured in the U.K. and Europe where
so far, the listed market was dominated by traditional sectors.
42Asset Monetisation Experience: India and Beyond Volume I: Monetisation Guidebook Concept: Industrial REITs
Industrial real estate investment trusts are a specialised category of REITs that invest in
industrial real estate properties which are occupied by facilities for manufacturing,
production of goods and for storage, distribution such as warehouses etc. Such
properties may either be standalone buildings or a cluster of same, whether in form of
industrial parks or otherwise. Industrial REITs may also own the land on which these
properties are developed. Industrial REITs, own and manage these properties, and lease
it out to businesses/ industrial consumers.
Industrial REITs provide investors a stable and liquid way to invest in the real estate
sector without building or purchasing industrial buildings on their own. Similar to other
REITs, these are primarily trust based investment vehicles that pool capital from various
financial investors including equity funds, institutional investors, retail investors. Capital
pooled from the investors is deployed to fund and own the industrial real estate assets,
which are then leased out to one or multiple tenants. income from tenancy of such
assets is used to provide a stable return to the investors in the REITs. These returns are
in form of dividend on holding/units which are periodically paid to investors. Further,
the unit holders also receive return by way of capital appreciation on the underlying
property.
As in case of REITs and InvITs in India, 90% of the income is expected to be paid to unit
holders. Further, subject to compliance of stipulated requirements, profits from
Industrial REITs are tax exempt.
Distribution centres and warehouses, which are collectively refers to as "logistics" real
estate are some of the biggest industrial REITs on NYSE. Given the growth in
e-commerce industry over the past few years, one of the biggest beneficiaries of the
growth in investment and capital deployment of industrial REITs have been
warehousing facilities, distribution and other storage facilities. Also, with demand for
storage and logistics rising on account of e-commerce, investors are guaranteed of
of-take and income in investments, thereby ensuring attractiveness of instruments to
all kinds of investors.
Benefits of Industrial REITs:
1. Flexible structure
Industrial REITs are structurally and regulatorily flexible to meet the demands in an
economic cycle. As against residential and commercial properties which are built
specific to customer requirements, Industrial REITs, can be customized to diferent
uses.
2. Lower Capital Expenditure
Industrial REITs are set up outside the heart of the cities and away from central business
districts which is mostly due to the need to ensure ease of inter-city movements and
accessibility of transportation. The acquisition costs for such properties are, hence,
43Asset Monetisation Experience: India and Beyond
Volum e I: Monetisation Guidebook
much lower thereby ensuring lower capital expenditure with stable return on investments.
Potential for investments in India
Given the availability of seasoned industrial parks and public sector assets of:
a. Warehousing corporations such as central warehousing corporation etc;
b. Industrial corporations;
c. Warehouses, silos and other such facilities etc
Concepts of Industrial REITs can be availed for leveraging private investment in such
public sector assets for monetisation. Industrial real estate investment trusts are a specialised category of REITs that invest in
industrial real estate properties which are occupied by facilities for manufacturing,
production of goods and for storage, distribution such as warehouses etc. Such
properties may either be standalone buildings or a cluster of same, whether in form of
industrial parks or otherwise. Industrial REITs may also own the land on which these
properties are developed. Industrial REITs, own and manage these properties, and lease
it out to businesses/ industrial consumers.
Industrial REITs provide investors a stable and liquid way to invest in the real estate
sector without building or purchasing industrial buildings on their own. Similar to other
REITs, these are primarily trust based investment vehicles that pool capital from various
financial investors including equity funds, institutional investors, retail investors. Capital
pooled from the investors is deployed to fund and own the industrial real estate assets,
which are then leased out to one or multiple tenants. income from tenancy of such
assets is used to provide a stable return to the investors in the REITs. These returns are
in form of dividend on holding/units which are periodically paid to investors. Further,
the unit holders also receive return by way of capital appreciation on the underlying
property.
As in case of REITs and InvITs in India, 90% of the income is expected to be paid to unit
holders. Further, subject to compliance of stipulated requirements, profits from
Industrial REITs are tax exempt.
Distribution centres and warehouses, which are collectively refers to as "logistics" real
estate are some of the biggest industrial REITs on NYSE. Given the growth in
e-commerce industry over the past few years, one of the biggest beneficiaries of the
growth in investment and capital deployment of industrial REITs have been
warehousing facilities, distribution and other storage facilities. Also, with demand for
storage and logistics rising on account of e-commerce, investors are guaranteed of
of-take and income in investments, thereby ensuring attractiveness of instruments to
all kinds of investors.
Benefits of Industrial REITs:
1. Flexible structure
Industrial REITs are structurally and regulatorily flexible to meet the demands in an
economic cycle. As against residential and commercial properties which are built
specific to customer requirements, Industrial REITs, can be customized to diferent
uses.
2. Lower Capital Expenditure
Industrial REITs are set up outside the heart of the cities and away from central business
districts which is mostly due to the need to ensure ease of inter-city movements and
accessibility of transportation. The acquisition costs for such properties are, hence,
In 2005-06, 157-mile Indiana East West Toll Road connecting the Chica go Skyway to the
Ohio Turnpik e was monetise d with a view to fund 10-year plan for building and fixing roads
throughout the state. The project was structur ed as a 75-year concession for managing
and operating the road and collecting tolls from motorists against an upfront consider ation
and the road remained owned by the state.
On June 29, 2006 the Indiana Toll Road Concession Company—a joint venture
road compan y—was awarded the right to operate the road for 75 years. The consortium
won the contract with a winning bid of USD 3.8 billion upfront payment. The concession
helpe d in financing the entire Indiana state’s road asset management plan for a period
of 10 years.
While project has been a windfall for the asset owners and the state of Indian a,
the project’s toll revenues sufered from 2008 recession impacting the project’s
debt serviceability in the mediu m term.
During 2014, the concessionaire ITR Concession Co LLC filed for bankruptcy and
the project subsequently induct ed a new investor and management also allowing
the creditors dues to be settled through the bankruptcy process. The toll road
is since being operated by Australia’s IFM Investors to operate the project for
the next 66 years.
Australia has an established track record in privatising large state-owned infrastructur e
transac tion involving 99 year lease of New South Wales electricity distributio n compa ny
44Asset Monetisation Experience: India and Beyond
Volume I: Monetisation Guide book
much lower thereby ensuring lower capital expenditure with stable return on
investments.
Potential for investments in India
Given the availability of seasoned industrial parks and public sector assets of:
a. Warehousing corporations such as central warehousing corporation etc;
b. Industrial corporations;
c. Warehouses, silos and other such facilities etc
Concepts of Industrial REITs can be availed for leveraging private investment in such
public sector assets for monetisation. TransGrid with the acquisition by a consortium of Pension and Infrastructur e funds for a
financing consider ation of AUD 10.3 billion. The consortium members are Hastings Funds
Management, the ASX-listed Spark Infrastructure, the Abu Dhabi Investment Authority,
Canada’ s Caisse de Dep ot et Placemen t du Que bec (CDPQ), and W ren House, part of the
Kuwait Investmen t Authority .
Hastings and its consortium partne rs reached financial close on the acquisitio n in December
2016, which comprise d AUD 5.8 billion debt and AUD 4.4 billion equity. TransGrid remains
a one of a kind since a number of factors led to the fierce competition during the bid.
TransGrid is the most treasured of the three transmis sion and distributio n companies to be
privatised in New South Wales, probably helped push bids higher than the AUD 9 billion
price tag that was estimated.
TransGrid is an example of monet isation of regula ted assets where network
prices are set by the regulator under the applicable National Electricity Law and
National Electricity Rules in the jurisdic tion.
TransGrid deal goes to show that the international bank market has sufcient
depth to finance the acquisition of even the largest infrastructure projects
in Australia showing an
jurisdictions.
National security implic ations were a critical consider ation for the asset owners
and hence stringent safegua rds were imposed on acquisit ions citing Transgrid
as critical infrastructu re. These include that Transgrid’s operation and control
be under taken solely from Australia and that foreign consor tium member s retain
an interest of no more than 50 per cent. Half of Transgrid’s board–including an
indepen dent chair and director–mus t be Australian citizens and residents.
45Asset Monetisation Experience: India and Beyond
Volum e I: Monetisation Guidebook Preparatory
Stage
4
The section provides an overview of the
preparatory actions by public sector entities
towards undertaking asset monetisation.
It starts with a general guidance
on the process towards asset
identification and methods of
monetisation, followed by
internal administrative
actions for formulation,
appraisal, and
approval process
(Preparatory
Stage).
Guidance
and
internal
administrative
framework for rolling
out the transactions
and completing the
asset monetisation process
(Transaction Stage) has been
covered as part of the next Section.
Preparatory Stage 47 4.1 OVERVIEW
The asset monetisation process needs to be seen as a sustainable strategy towards
improving infrastructure delivery and strengthening the public sector balance sheet.
Towards this, the public sector entity needs to institutionalise an efficient and effective
framework for creating a marketable and sustainable asset monetisation plan. The public
sector agencies need to follow a structured process along the following lines for the
Preparatory stage:
1. Step 1 – Preparation of an asset monetisation and financing plan
2. Step 2 – Asset screening and packaging
3. Step 3 – Transaction preparation and structuring
4. Step 4 – Approval process
At the end of the Preparatory stage, the public sector agency would have a ‘transaction-
ready’ asset for monetisation. An overview of the steps is shown in the figure below.
The preparatory actions identified herein are recommendatory in nature based on globally
witnessed best practices in asset monetisation process. However, it is prudent that the
public sector agency imbibes the learnings from each of the steps to ensure better service
delivery, and improved realizations from asset monetisation.
Figure 24: Process roadmap
4.2 STEP 1 – PREPARATION OF ASSET MONETISATION AND
FINANCING PLAN
The investment and financing plan would serve as overall guidance factors for the public
sector agency to determine the scale of asset monetisation to be embarked upon over
the medium term.
48Preparatory Stage Volume I: Monetisation Guidebook Figure 25: Sectorial investment and financing plan – Illustrative steps
55
The proposed plan should ideally cover the following areas:
Capital investment plan and project pipeline – The infrastructure gap is estimated
based on the gap between the existing infrastructure expenditure levels and expenditure
envisaged under the overall vision. The ministry/sector shall prepare a medium-term
capital investment plan aimed at bridging the gap while laying out the pipeline of projects
required to achieve the same. The capex estimates for projects shall be estimated based
on a normative approach. For the purposes of next four year period investment plan under
NIP should be treated as the pipeline.
Financing plan and scale of asset monetisation – The public sector entity may prepare
a financing plan for meeting the investment cost as laid out under the capital investment
plan or even otherwise detail an asset monetisation plan to be self-sufficient and diversify
its funding sources. The financing plan is to be prepared based on a review of the financial
position of the public sector agency combined with a reasonable estimate on the central/
state grants over the medium-term. The gap in financing from the available sources of funds
including grants/ debt (across multiple sources) and own funds, needs to be identified.
The step helps quantify the scale of financing gap to be met through asset monetisation
and help line ministries formulate a phasing plan for the same.
By end of this step, the public sector entity is expected to have a clear understanding of
the scale of funds to be mobilized through asset monetisation over the medium term viz.
over the next 5-10 years. Further, the monetisation plan of a public asset owner should
be seen not just in light of its own funding gap, but of the overall ministry/ department.
4.3 STEP 2 – ASSET SCREENING AND PACKAGING
In this step the public sector entity will identify the assets to be monetised to meet the
objectives identified in Step 1 above.
Identification of the right assets for monetisation is a multi-layered decision making task.
It involves the perspectives of key stakeholders – Government/ public sector agency,
investors, development and operation partners, private sector ecosystem including
developers, operators, tertiary material suppliers, monitoring agency and users, etc. – to
be imbibed into the asset identification process. As a near term measure, a compendium
55 To be undertaken at the overall ministry/sectoral level
49Preparatory Stage Volume I: Monetisation Guidebook of asset-level information reflecting key operating, financing and profitability parameters
can be maintained for internal use by concerned line ministries.
4.4 STEP 3 – TRANSACTION STRUCTURING
The Steps 1 and 2 above represent prudent actions which may be initiated by the public
sector agency for arriving at a shortlist of assets for monetisation and phasing. At the end
of step 2, a prioritised list of assets for monetisation and the method of monetisation would
be ready. This Step 3 starts with the selection of one of the assets from the prioritised list
and initiating the preparatory actions towards transaction.
Before initiating the transaction process, the public entity may need to undertake feasibility
studies for monetisation. This stage covers project preparation (including techno-economic
feasibility, valuation analysis), project structuring, preparation of standard contractual
documents and obtaining of project clearances etc. The typical steps in the project
structuring are shown in figure below.
Figure 26: Steps in project structuring
50Preparatory Stage Volume I: Monetisation Guidebook The detailed studies are aimed at exploring the project boundaries, technical configuration
and feasibility, demand projections and financial feasibility, review of policy/ legal/
regulatory environment, and the value-for-money and affordability considerations. The
scale of the studies varies based on the complexity of the proposed transaction.
aIn case of monetisation of existing brownfield assets with limited capex
requirement, the studies may focus more on the financial assessment, followed
by risk assessment and mitigation measures for effective O&M. This is typically
useful in case of capital market instruments like InvIT and REIT models.
aIn case of transactions which require substantial capex, detailed project preparation
documents to ensure feasibility of the project proposal has to be done.
This will help structure the projects so that the risks are properly allocated between public
and private sector. The project structuring and risk allocation is an important input to the
preparation of contract documents.
The project structuring process needs to be supported by experienced transaction
advisors with an established track record in undertaking project feasibility and structuring
transactions.
Work that will be undertaken by the transaction advisors include cost and viability analysis,
valuation analysis (of applicable), stakeholder consultation, etc. Further the consultants
will submit a transaction advisory report based on which the public sector enterprises
will internally decide on going ahead with the transaction.
At the end of this step, the public sector agency would have prepared all the project
documents related to the transaction including the backup studies and bid documents
etc. The public sector agency thereafter needs to prepare the “project proposal” in the
appropriate format depending on the category and value of transaction. Guidance/
recommendation in this regard is as provided in following sub-section. The proposal will
summarise the key observations and will be submitted to nodal authorities for approval.
Figure 27: End to End Process for Project Preparation
4.5 STEP 4 – APPROVAL/ SANCTION
Under this step, the public sector agency submits the project proposal to the competent/
nodal authority for approval/ sanction.
In case of central sector agencies, the approval process has been established under the
“Guidelines for Formulation, Appraisal and Approval of Central Sector Public Private
Partnership Projects, 2013”. The appraisal/approval process is a two stage process with in-
principle approval prior to issue of RFQ and final recommendation of PPPAC for approval
of competent authority prior to receipt of financial bids. In cases where the PPP project is
51Preparatory Stage Volume I: Monetisation Guidebook based on a duly approved Model Concession Agreement (MCA), ‘in principle’ clearance by
the PPP Appraisal Committee (PPPAC) may not be necessary. In such cases, final approval
of the PPP Appraisal Committee may be obtained before inviting financial bids
Further, some states like Gujarat and Tamil Nadu have established a separate agency
towards handholding line ministries as well as grant the necessary approval for undertaking
PPP projects. In other cases, it is largely under the purview of the line ministries.
Further, for non-PPP based monetisation models, Department of Investment and Public
Asset Management (DIPAM) has laid down detailed procedures and mechanisms for
Central Public Sector Enterprises (CPSEs) / Public Sector Undertakings (PSUs) / Other
Government organizations etc.
56
, however, this is primarily focused on non-core assets with
provision for adoption for core assets through Competent Authority approval.
56 https://www.dipam.gov.in/dipam/dipam_docs/assetMonetisation/Asset%20Monetisation%20
Procedure%20and%20Mechanism_0.pdf
52Preparatory Stage Volume I: Monetisation Guidebook Transaction
Stage
5
The section provides an overview
of the steps involved in the
Transaction Stage and the
regulatory and institutional
structure covering
each of the asset
monetisation
instruments
This
section
provides
and overview
of the asset
monetisation
processes across the
key instruments identified.
It covers the regulatory
environment towards, the key
institutional stakeholders, the
documentations involved and the actual
steps in the asset monetisation process for
each instrument.
Transaction Stage 53 5.1 INVIT – REGULATORY FRAMEWORK AND PROCESS
5.1.1 Regulatory framework and Institutional stakeholders
Regulatory framework
InvITs are independent trusts registered under the Indian Trust Act, 1882. The regulatory
framework for an InvIT issuance is guided by the SEBI (Infrastructure Investment Trusts)
Regulations, 2014 (as updated/amended from time to time)
57
.
As discussed in Section 2, the key stakeholders with respect to InvIT include the sponsor
(usually the asset owner), unit holders (usually the private sector investors), the trustee
(one who holds the InvIT assets in trust for the benefit of the unit holders), and project
managers (usually developers/ asset managers and may be private sector/ public sector
entities) and investment manager (responsible for adding assets to the InvIT / divesting
assets from the InvIT / other financing decisions related to the InvIT). The SEBI (InvIT)
Regulations, 2014 primarily provide for:
Figure 28: Elements of SEBI InvIT Regulations
Other sections covered include inspection process, procedures for action in case of default,
and other miscellaneous actions.
Table 12: Salient features of SEBI InvIT Regulations 2014
HeadRemarks
Sponsor–
Eligibility
Minimum net worth: Rs. 100 crores;
At least 5 years of experience as developer and two projects
completed
Mode of
Placement
Private Placement
Public Listing
SPV
shareholding
InvIT must hold at least 51% stake in the Project SPV
57 The consolidated amended regulations is as provided on SEBI website.
54Transaction Stage Volume I: Monetisation Guidebook Investment
Value of InvIT assets: Minimum Rs. 500 crores
Initial offer size of InvIT: At least § 250 crore.
For Public Placement:
� Not less than 80% of InvIT value to be invested in “completed and
revenue generating projects” in eligible infrastructure projects (directly
or through Holdco)
For Private Placement:
� Not less than 80% in eligible projects
58
Holding Period
An InvIT shall hold an infrastructure asset for a period of not less than
three years from the date of purchase of such asset by the InvIT
Payment to unit
holders
Not less than 90% of net distributable cash flows of the SPV
distributed to the InvIT;
Not less than 90% of net distributable cash flows of the InvIT
distributed to unit holders;
Distribution at least twice in a year
Borrowings
A listed InvIT may issue debt securities as long as the consolidated
borrowings and deferred payments (of InvIT, Holdco and SPV), net of
cash and cash equivalents does not exceed 70% of the asset value
In case of aggregate borrowings and deferred payment exceeding 49%,
the InvIT has to be rated AAA
Other guidelines, circulars, rules of SEBI, RBI related to InvIT are as provided in Annexure 1.
Institutional stakeholders
Sponsor
The sponsor is the entity that sets up the InvIT. In case of traditional
procurement route, the public sector agency is usually designated as the
sponsor and in case of PPP, the private sector developer/project SPV
holding the concession agreement is the sponsor.
Trustee
A trustee is an entity holding the InvIT assets for the benefit of the
unitholders and is registered with SEBI under the Securities and Exchange
Board of India (Debenture Trustees) Regulations, 1993. The activities of the
trustee are regulated under a formal “Trust deed” entered to between the
Sponsor, InvIT and the trustee laying out the roles and responsibilities of
each members of the trust
Investment
Manager
This entity is responsible for the management of assets and investments
of the InvIT. The role of the investment manager is detailed under Section
10 of the SEBI InvIT Regulations 2014. Key responsibilities include: (i)
investment decisions with respect to the underlying assets or projects of
the InvIT including any further investment or divestment of the assets (ii)
oversee activities of the project manager with respect to compliance to the
relevant agreements (iii) work with the merchant banker and the trustee in
the issuance related documentations (iv) ensure investments of InvIT are in
accordance with the guidelines. The investment manager needs to have a
net worth of at least Rs. 10 crore and an experience in fund management
and advisory services of at least 5 years to be eligible.
58 Eligible Projects means In non-PPP projects, the infrastructure project has received all requisite approvals
for commencement of construction In PPP projects, the project has achieved commercial operations
with one-year track record, or are in pre-COD stage
55Transaction Stage Volume I: Monetisation Guidebook Project Manager
This entity brings in the necessary technical expertise for better
management of assets. The project manager shall undertake operations
and management of the InvIT assets including making arrangements for the
appropriate maintenance, either directly or through the appointment and
supervision of appropriate agents. The activities of the project manager
are regulated under a “project implementation agreement” or “project
management agreement”. This agreement is between the project manager,
the concessionaire SPV, and the trustee which sets out obligations of the
project manager with respect to execution of the project.
Other key stakeholders incidental to the InvIT registration and issuance process include
Valuer, Auditor(s), Merchant banker(s), Registrar & Transfer agent, Banks, Registrar to the
issue, Credit rating agencies, and depository participants.
5.1.2 Issuance Process
The steps in issuance depends on the whether the sponsor envisages to undertake the
InvIT issue through private placement or public issue (depending on the number of unit
holders offered to). In case of public issue, the issue of units maybe through the following
methods: initial public offer (IPO), or follow-on public offer (FPO) or any other issue made
to the public as maybe specified. Brief description of the issuance process is as follows:
Selection of assets to be put under InviT
Establishment of Infrastructure Investment trust under the Investment trust act
Engagement of merchant banker
Finalisation of other key stakeholders including trustee, project manager
Registration of InviT with Sebi
Decision on private vs public issue - Depends on size of issuance etc.
Structuring the transaction
Completion of transfer of asset
Completion of other transaction documentation including Investment
management, project management agreement
Pre- Issuance process
Issuance process and allotment of units
Listing process
Figure 29: Step by Step Issuance Process
56Transaction Stage Volume I: Monetisation Guidebook 5.2 REIT – REGULATORY FRAMEWORK AND MONETISATION
PROCESS
5.2.1 Regulatory framework and Institutional stakeholders
Regulatory framework
The regulatory framework for an REIT issuance is guided by the SEBI (Real Estate
Investment Trusts) Regulations, 2014. REITs, like InvITs, are registered are independent
trusts under the Indian Trust Act, 1882.
The regulatory/ institutional structure is largely similar to that of InvITs except for key
differentiations in – Class of assets, eligibility/investment conditions under SEBI (REIT)
Regulations, 2014 and a common intermediary for management of assets and investment
viz. Manager (as against separate investment and project manager under InvIT – among
others.
Such key regulatory/institutional aspects (which are different from InvIT) are as highlighted
herein
Table 13: Salient features of SEBI REIT Regulations 2014
HeadRemarks
Sponsor–
Eligibility
Each sponsor to hold not less than five per cent. of the number of units
of REIT on post-initial offer basis
Minimum net worth of Rs. 100 crores, on a collective basis;
— Each sponsor should have at least Rs. 20 crores of net worth
At least 5 years of experience as developer and two projects completed
Investment/
Asset
Not less than 80% of REIT value has to be invested in “completed and
rent/ income generating properties” (directly or through Holdco)
No more than 20% of REIT value may be invested in under-construction
projects
59
/ debt securities/ equity investment in real estate companies/
government securities/ money-market instrument/ Transfer of
Development rights acquired for utilization in a particular project/
unutilised Floor-Space-Index (FSI)
Not less than 51% of the consolidated revenues of the REIT, Holdco and
SPV
60
shall be from rental, leasing and letting real estate assets or any
other income incidental to the leasing of such assets.
Borrowings
A listed REIT may issue debt securities as long as the consolidated
borrowings and deferred payments [of REIT, Holdco and SPV], net of
cash and cash equivalents does not exceed 49% of the asset value
In case of borrowings + deferred payment exceeding 25%, the REIT has
to be rated AAA
59 Subject to conditions
60 Excluding gains arising from disposal of properties,
57Transaction Stage Volume I: Monetisation Guidebook Other guidelines, circulars, rules of SEBI, RBI related to InvIT are as provided in the
Annexure.
Institutional stakeholders
SPV is the entity which holds the controlling stake (51% or higher) either directly or indirectly
(through a holding company). It may be registered as a company (under Companies Act,
2013) or as (LLPs). The SPV should hold at least 80% of its assets directly in properties.
Sponsor – The sponsor is the entity that sets up the REIT and transfers its assets to the
same. The sponsor may choose to transfer the entire shareholding or interest/ rights to
the SPV. The sponsor may also sell its stake in the units to another party, who will be “re-
designated sponsor” for the REIT. However, such sales can happen only after a period of
three years from the date of listing.
Manager is responsible for the management of assets and investments of the REIT. The
role of the manager is detailed under Section 10 of the SEBI REIT Regulations 2014. Key
responsibilities include: (i) investment decisions with respect to the underlying assets
of the REIT including any further investment or divestment of the assets (ii) undertake
management of REIT assets including lease management, maintenance of the asset, regular
structural audits, regular safety audits etc. either directly or through the appointment and
supervision of appropriate agents (iii) work with the merchant banker and the trustee in
the issuance related documentations (iv) ensure investments of REIT are in accordance
with the guidelines.
The manager needs to have a net worth of at least Rs. 10 crore and an experience in fund
management and advisory services of at least 5 years
61
to be eligible. The activities of the
manager are regulated under an “investment management agreement” . This agreement
is between the trustee and the manager which lays down the roles and responsibilities of
the investment manager towards the REIT.
5.2.2 Issuance Process
As detailed in Section 2, the public sector agencies shall identify the asset and get the
necessary internal approvals for initiating asset monetisation. Brief description of the
issuance process is as follows:
i. Selection of properties to be put under the REIT – This step involves the sponsor to
identify the key properties for asset monetisation. The contours of the properties
need to be clearly defined so as to meet the objectives as laid out under the
REIT regulations. At least 80 percent of the REIT assets need to be invested in
“completed and rent/ income generating properties”.
ii. Establishment of Real Estate Investment trust under the Indian Trust Act – The
sponsor shall establish the Real Estate Investment Trust as per the provisions of
Indian Trust Act, 1882.
61 Further, at least 2 of the key personnel of the manager should have an experience of 5 years or above in
fund management and advisory
58Transaction Stage Volume I: Monetisation Guidebook iii. Engagement of merchant banker – The merchant banker plays a critical role as a
financial intermediary in the REIT issuance. Merchant bankers are registered with
SEBI and are regulated under the SEBI (Merchant Bankers) Regulations, 1992.
iv. Finalization of other key stakeholders – Trustee, and Manager – The next step in
the issuance process is the finalization of the trustee, and the manager. The roles
and responsibilities of the key stakeholders are discussed in section above. The
hiring of trustee, and the manager shall be as per the procurement guidelines
as applicable.
v. Registration of REIT with SEBI – The trust needs to be registered with SEBI as a
Real Estate Investment Trust (REIT). Towards this, the sponsor shall put forward
an application for registration with SEBI as per the format laid out in Schedule I
of the SEBI REIT Regulations 2014. The key documentations include: (a) General
information (b) Details of Trust (c) Details of Trustee (d) Details of Sponsor(s)
(e) Details of Manager (f) Details of Business plan and investment strategy (g)
Details of any regulatory actions and other declarations.
vi. Completion of transfer of asset – Based on the applicable rules/ guidelines,
the sponsor(s) shall transfer or undertake to transfer to the REIT, its entire
shareholding or interest [and rights] in the [holdco and/ or] SPV or ownership
of the real estate properties, subject to a binding agreement.
vii. Issue process and allotment of units – REIT shall make an initial offer of its
units by way of public issue only
62
. The issue process provides a window for the
investors to participate in the bidding process for the REIT. The investors shall be
allocated the proportional share in the number of units issued. The bidders shall
submit their bids for the units within the bid/issue period to the lead manager.
The registrar shall provide a schedule of bids received which shall indicate the
bid amount received in respect of each bid. The allotment may be discretionary
or based on some pre-determined criteria.
62 Any subsequent issue of units by the REIT may be by way of follow-on offer, preferential allotment,
qualified institutional placement, rights issue, bonus issue, offer for sale or any other mechanism and in
the manner as may be specified by the Board.
59Transaction Stage Volume I: Monetisation Guidebook 5.3 PPP CONCESSION BASED MODELS – FRAMEWORK AND
PROCESS
5.3.1 Regulatory framework and Institutional stakeholders
Key Institutional initiatives for PPP based Projects by Government of India
In 2006, the Government took steps to create an ecosystem for mainstreaming PPPs.
This has been helpful to stakeholders in the PPP space, including private developers,
financial institutions and governments (at national, state and local levels). The key
policy and institutional initiatives undertaken include:
aSetting up of the PPP Appraisal Committee (PPPAC)
aExtending financing support through the VGF (Viability Gap Funding) Scheme
aPreparation of PPP toolkits, guidelines and knowledge dissemination products
aEstablishment of transparent and competitive bidding processes–through
standardized procurement documents
At the central-level, the PPP Appraisal Committee (PPPAC) recommends project for
approval of competent authority for central sector projects. Further, line ministries/ public
sector agencies have adopted model concession agreements prepared by NITI Aayog
(erstwhile Planning Commission). Alternatively, respective sector-specific MCAs have been
developed to enable a transparent and streamlined process.
At the state-level, a few states in India have created the regulatory and institutional
structure to aid public private partnership. Key states which have a clearly defined legal
framework for private investment in public infrastructure are Andhra Pradesh, Gujarat,
Karnataka, Tamil Nadu, Uttar Pradesh, Madhya Pradesh, Rajasthan, Orissa, etc.
5.3.2 PPP procurement process
The project preparation activities of the project can be divided into three phases – project
identification (covered under Section 3), project development and approval (feasibility
studies, detailed technical studies and final approval) and project procurement.
The Project development and approval of PPP Projects has already been covered in the
previous section.
The procurement process is the process of selection of private partner. It is important
that the process of selection of the private partner is transparent, non-discriminatory,
and timely to ensure project success. While competitive procurement processes have
been the overarching theme for PPP procurement in India, the procurement steps and
regulations covering the same vary across agencies.
60Transaction Stage Volume I: Monetisation Guidebook The procedure for PPP procurement may be divided into the following four stages:
Request for
qualification
Request for
proposal
Bid evaluation
and award
Commercial close
The objective of
stage is to gather
information on
the capacities of
Applicants and
shortlisting based
on requirements to
deliver on project
outcomes.
Financial bids
from qualified
applicants (after
the RFQ stage) for
undertaking the
PPP project
Evaluation of the
RFP submissions
of the private
sector bidder and
selecting the best
proposal based on
a pre-determined
criteria.
Last stage in
procurement process
where the private
sector partner enters
in to a formal contract
with the public
sector agency for
the implementation/
management of the
PPP project.
Figure 30: Procedure for Public Procurement
61Transaction Stage Volume I: Monetisation Guidebook Key imperatives
for Monetisation
6
This section provides an
overview of the initiatives by
Government and other
key actions suggested
for provision of
fillip to asset
monetisation
Key imperatives for Monetisation 63 6.1 RECENT INITIATIVES BY GOVERNMENT OF INDIA
The Government, over the past few years, has consistently focused on reforms and
initiatives for boosting private participation in infrastructure. And with this objective, have
been the recent initiatives towards streamlining the process of capital recycling through
asset monetisation, by public and private sector entities. Some of the key initiatives, under
Budget 2021-22, aimed at increased adoption of financing instruments and for enabling
assets monetisation by public sector entities include:
A. Increased adoption of Financing Instruments
Key amendments pertaining to InvIT/ REIT
—Access to funds
In order to enable debt financing of InVITs and REITs by Foreign Portfolio
Investors (FPIs), Finance Act 2021 has enabled amendments in the Securities
Contracts (Regulation) Act, 1956 for recognising InvITs, REITs as “securities”.
Related amendments in SARFAESI Act and Recovery of Debts due to Banks
and Financial Institutions Act have also been undertaken under the Finance Act
2021
63
.
This will enable InvITs and REITs to borrow money from FPIs and issue debt
securities, thereby enabling replacement of expensive debt with cheaper funds.
—Streamlining taxation
Budget 2021-22 has provided clarification with respect to dividend not being
taxable at the trust level (dividend distribution tax) but in the hands of the
unitholder (dividend withholding tax). Dividend payment to REIT and InVIT will
hence be exempt from TDS.
B. Enabling Asset Monetisation by Public Sector Entities
GoI has undertaken several initiatives to address the operational/commercial challenges as
also to incentivize State Governments and State level entities undertaking monetisation.
The key initiatives include:
Incentive Mechanism for Capital Expenditure by State Governments
—Under the recently institutionalised Scheme for Special Assistance to States for
capital expenditure for FY 2021-22, it has been decided that incentives be provided
for asset monetisation and disinvestment by State government/ entities. As an
incentive for asset monetisation, additional allocation equivalent to 33% of value
of assets realised and deposited in State consolidated funds or in account of State
public sector enterprises owning the assets. The allocation and disbursement is
subject to the realised amount being necessarily used for capital expenditure by
States.
63 Provisions under Part IV, Part IX and Part XI of Finance Act 2021
64Key imperatives for Monetisation Volume I: Monetisation Guidebook Stamp duty exemption on asset transfer from one Government-owned entity
to another such entity
—At present, assets of key CPSEs reside in their respective balance sheets. However,
monetisation may require transfer of such assets from the CPSEs’ balance sheet
to another entity or an SPV which typically may attract stamp duty implications,
ranging between 5%-10% across states, thus significantly reducing monetisation
proceeds / benefits accruing to selling CPSEs.
—To address this challenge, GoI through the Finance Act 2021 has provided
for exemption of stamp duty towards transfer of asset between Government
entities
64
, subject to certain requirements. This is aimed at creating a level-playing
field for asset monetisation (especially through the InvIT/ REIT route where stamp
duty cost was a significant impediment to asset transfer and consequent asset
monetisation).
Tax neutral provision for demerger
—The Finance Act 2021, has added an explanation to the Section 2 (19AA) of the
Income Tax Act, 1961, stating that the reconstruction or splitting up of a public
sector company into separate companies shall be deemed to be a demerger
provided that the process involves transfer of asset to the resultant company,
and the resultant company is a public sector company
65
.
—The demerger of companies as defined under this Section 2 (19AA) is considered
as tax neutral and hence avoids any capital gains tax implication. Besides, set
off and carry forward of losses would be allowed if proposed conditions under
section 72AA of the Income Tax Act, 1961 are complied with. Benefits of past
losses, if any, are also available. In view of loss of carry forward losses, tax holiday
benefits etc. no longer being impediments, these changes are expected to ease
the asset monetisation process for public sector infra companies
Other Relevant Aspects
Amendments to Regulations for InvIT and REIT by SEBI
—Increase in borrowing limits for InvIT and Reduction in minimum allotment
and trading lot requirements for investors in publicly issued InvITs and REITs
The limit for consolidated borrowing and deferred payments under SEBI’s
regulations for Infrastructure Investment Trust has been enhanced to 70% (from
49%) of the InvIT value; subject to key requirements being fulfilled viz.
64 Excerpt from the Finance Act is as follows: “………any instrument for conveyance or transfer of a business
or asset or right in any immovable property from a Government company, its subsidiary, unit or joint
venture, by way of strategic sale or disinvestment or demerger or any other scheme of arrangement,
to another Government company or to the Central Government or any State Government, or to the
development finance institution by any law made by the…...”. , “Government company” shall have the
same meaning as assigned to it in clause (45) of section 2 of the Companies Act, 2013
65 Section 3- Finance Act 2021
65Key imperatives for Monetisation Volume I: Monetisation Guidebook
Credit rating of AAA of the InvIT debt;
Funds be utilized only for acquisition or development of infrastructure
projects;
Track record of at least six distributions on a continuous basis, post listing, in
the year preceding the financial year in which the borrowings are proposed
to be availed; and
Prior approval of 75% unitholders
—Securities and Exchange Board of India recently made an amendment to InVITs/
REITs regulations for revision in minimum subscription and trading lot. Accordingly,
for publicly issued REITs and InvITs, the revised minimum application value was
brought down within the range of ₹10,000-15,000 and the trading lot to 1 unit.
This is expected to provide a boost to retail participation in InvITs/ REITs. The
decision to cut entry amount is significant, as it will allow small retail investors
to take part in these products.
Amendments to TOT framework
Key reform initiatives to widen the investor base for TOT transactions include:
—Flexibility in concession period – The concession period of toll projects may now
be between 15-30 years as against the fixed term of 30 years. This is expected to
increase participation from Indian developers in addition to large pension funds,
insurance companies, sovereign wealth funds.
—Reduced minimum operating history requirement –Minimum operating history of
one year compared to two years of operations post commencement of tolling is
expected to expand the eligible universe of operating toll roads to be considered
under the TOT package
Model Concession Agreements (MCAs)
—MCAs developed by NITI Aayog have been adopted by various sector to enable an
evolved contractual framework, enhanced clarity on loss protection to investors
and lenders, clearly defined obligations of stakeholders, etc. while roads (for
TOT, BOT (toll) and HAM road assets), airports (for OMDA), and ports have
availed and evolved the model concession framework over time, recently MCAs
have been developed across high potential sectors like Railways (Railway station
development, passenger train operations) etc. There is a need to develop model
PPP concession frameworks for various other brownfield asset classes identified
under the NMP for quicker adoption by public asset owners.
6.2 KEY IMPERATIVES
Asset Monetisation initiative has three critical stakeholders, the Government (Centre or
State) which monetises the asset, private investor taking on ownership/ management
66Key imperatives for Monetisation Volume I: Monetisation Guidebook and the general public who are typically the users of the asset. There are considerations
of each of these stakeholder groups which must be met in order to effectively roll out a
successful asset monetisation programme.
The imperatives to give a thrust to asset monetisation are anchored across three
themes – (1) Expansion of the investor base and scaling of monetisation instruments
(2) Strengthening demand-side capacity, and (3) Creating effective frameworks to aid
monetisation.
Figure 31: Imperatives for Asset Monetisation
Pillar 1: Expanding the investor base and scaling up instruments
Streamlining investment
guidelines
The long-term nature of infrastructure projects requires active
participation from investors looking at a similar return profile from
their investments. However, the existing investment guidelines for
insurance and pension funds limit the exposure of such funds
to InvIT/ REIT assets. The investment limit are as follows: (i)
Insurance funds – Maximum exposure at lower of 3% of fund
size of the Insurer/ 5% of the units issued by a single InvIT/ REIT
(ii) Pension funds under EPFO are also regulated to invest up to
maximum of 5% of the funds in REIT/ InvIT (iii) Mutual funds can
invest up to 10% of their Assets under management in a single
InvIT/ REIT. These need to be streamlined to ensure consistency.
Moreover, there are also inconsistencies across categories on
the level of exposures. For example: IRDA regulations do not
permit investment of insurance funds in unlisted InvITs. Hence,
a staggered approach for streamlining of investment guidelines
and limits is envisaged to keep pace with the growth in the InvIT
market starting with the allocation of insurance and pension
funds towards unlisted InvITs.
Tax benefits
More tax-efficient and user-friendly mechanisms like allowing tax
benefits in InvITs as eligible security to invest under Section 54EC
of the Income-Tax Act, 1961, are important starting points for
initiating retail participation in the instruments.
67Key imperatives for Monetisation Volume I: Monetisation Guidebook Recourse under
Insolvency and
Bankruptcy Code (IBC)
Since the trusts are not considered as ‘legal person’ under the
extant regulations, the IBC regulations are not applicable for
InvIT loans. Hence, the lenders do not have existing process for
recourse to project assets. While the lenders are protected under
the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (“SARFAESI Act”)
and the Recovery of Debts and Bankruptcy Act, 1993 (the “RDB
Act”), the provision of recourse under IBC regulations will bring
in added level of comfort for the investors.
Pillar 2: Strengthening demand-side actions
Establish a transparent
and independent
process for setting cost-
reflective user charges
Development of scalable models for asset monetisation requires
a clear and transparent pricing framework for infrastructure
services which is commensurate with the risks transferred. Simply
put, the developer/ investor would envisage a risk-adjusted
return that justifies the investments towards asset development/
maintenance.
Reforming the financial
management and
accounting practices to
aid monetisation
The delineation of the revenue and expenditure specific to
the assets is an important pre-requisite for asset monetisation
transaction. The public sector agencies should increasingly
move towards asset-level financial disclosures and earmarking
of specific revenue streams across all the assets, which will help
establish investor comfort.
Creating institutional
structures for fast-
tracking asset
identification and
monetisation transaction
The institutional backbone for scaling up asset monetisation
may be anchored at the level of the relevant ministries. With the
National Monetisation Pipeline (NMP), each ministry may establish
suitably empowered working group with the sole mandate to
identify assets, method of monetisation and handhold in the
transactions/ procurement process. This pipeline will also form a
baseline for the Ministry for monitoring and tracking performance
and data on the potential assets.
Pillar 3: Creating effective frameworks to aid monetisation
Standard agreements
should be developed
across sectors
Robust MCAs have been developed in roads, ports and airport
sectors and investors have received these agreements well which
has manifested itself through increased investor participation in
projects from these sectors. There is a need to develop model
PPP concession frameworks for various other brownfield
asset classes identified under the NMP for quicker adoption
by public asset owners.
68Key imperatives for Monetisation Volume I: Monetisation Guidebook Arrangements for
monetisation backed
by a robust incentive
mechanism
Similar to the National Partnership Agreements on asset recycling
in Australia, the Government of India may enter into formal
working arrangements with each line ministry/ CPSE/ States to
create medium-term road map for asset monetisation in line with
the NMP. The agreements shall lay out the timelines, roles and
responsibilities of each parties, preparatory actions and financing
modalities (including technical assistance support) over a 4-5 year
period. A Mechanism to plough back monetisation proceeds in
form of incentives to the public sector agency (to the extent that
the monetisation proceeds are utilized towards creation of new
assets) has already been institutionalised as highlighted above.
Effective contract and
dispute resolution
mechanisms honoring of
contracts
Contract management is a critical element in the monetisation
jigsaw. Effective mechanisms for contract management,
arbitration and conciliation are important to ensure success of
monetisation. In order to boost investor confidence, it is crucial
to maintain sanctity of contracts. The provisions should be legally
enforceable, such that once parties duly enter into a contract,
they must honour their obligations under that contract and, in
case they don’t honour, there should be adequate safeguards for
other stakeholders. This should be applicable to both public and
private sectors. Sensitising state governments and local bodies
on honoring of contracts is crucial issue.
69Key imperatives for Monetisation Volume I: Monetisation Guidebook Annexure
Annexure 71 ANNEXURE I : CIRCULARS, RULES AND GUIDELINES
PERTAINING TO INVIT
The other circulars, rules and guidelines pertaining to InvIT are as follows:
aSEBI circular dated May 11, 2016 on Guidelines for public issue of units of InvITs
aSEBI circular dated October 20, 2016 on Disclosure of financial information in
offer document/placement memorandum for InvITs
aSEBI circular dated November 29, 2016 on Continuous disclosures and
compliances by InvITs
aSEBI circular dated January 18, 2018 on participation by Strategic Investor(s) in
InvITs and REITs
aSEBI circular dated April 13, 2018 on Guidelines for issuance of debt securities
by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts
(InvITs)
aSEBI circular dated April 23, 2019 on Guidelines for determination of allotment
and trading lot size for Real Estate Investment Trusts (REITs) and Infrastructure
Investment Trusts (InvITs)
aSEBI circular dated November 27, 2019 (amended on November 17, 2020) on
Guidelines for preferential issue of units and institutional placement of units
by a listed Infrastructure Investment Trust (InvIT)
aSEBI circular dated December 24, 2019 on Guidelines for filing of placement
memorandum-InvITs proposed to be listed
aSEBI circular dated November 04, 2020 on Guidelines for rights issue of units
by an unlisted Infrastructure Investment Trust (InvIT)
Loans to InvIT – RBI Regulations
As per an RBI circular dated October 14, 2019 (RBI/2019-20/83, DBR. No.BP.
BC.20/08.12.014/2019-20), the central bank has now issued guidelines on bank lending
to InvITs. Such bank lending to InvITs would be subject to the following conditions:
aBanks are required to formulate a board-approved policy on exposure to
InvITs covering processes, such as appraisals, loan sanctions, exposure limits,
and mechanisms for monitoring
aBanks are required to undertake thorough assessment of sufficiency of cash
flows at the InvIT level to ensure timely debt servicing
aThe overall leverage of InvIT and the underlying SPVs together should be
within the permissible limits prescribed in the board approved policy of the
bank
aBanks are required to monitor the performance of underlying SPVs, as the
ability of an InvIT to meet debt obligation depends on the performance of
the underlying SPVs
72Annexure Volume I: Monetisation Guidebook
Banks are required to lend to only those InvITs, where the underlying SPVs
have existing debt and are not facing any financial difficulties
Borrowing company should provide infrastructure facilities and should have
satisfactory net worth
Borrowing company or its directors/ promoters should not have defaulted
on bank/FI loans
Bank financing to be restricted to 50% of the finance required for acquiring
the promoter’s stake
Tenor of bank loans should not be longer than seven years
Bank financing acquisition of shares by promoters should be within the
regulatory ceiling of 40% of their net worth as of March
31 of previous year
Board should have approved the proposal for bank finance
Compliance with statutory requirement as mentioned under Section 19(2) of
the Banking Regulations Act, 1949
Source: RBI circular dated October 14, 2019 (RBI/2019-20/83, DBR. No.BP.BC.20/08.12.014/2019-20, National
Infrastructure pipeline 2020
The other circulars, rules and guidelines pertaining to REIT are as follows:
SEBI circular dated December 19, 2016 (amended on January 15, 2019) on
Guidelines for public issue of units of REITs
SEBI circular dated December 26, 2016 on Disclosure of financial information in
offer documents for REITs
SEBI circular dated December 29, 2016 on Continuous disclosures and
compliances by REITs
SEBI circular dated January 18, 2018 on participation by Strategic Investor(s) in
InvITs and REITs
SEBI circular dated April 13, 2018 on Guidelines for issuance of debt securities
by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts
(InvITs)
SEBI circular dated April 23, 2019 on Guidelines for determination of allotment
and trading lot size for Real Estate Investment Trusts (REITs) and Infrastructure
Investment Trusts (InvITs)
SEBI circular dated November 27, 2019 (amended on September 28, 2020) on
Guidelines for preferential issue of units and institutional placement of units by
a listed Real Estate Investment Trust (REIT)
SEBI circular dated January 17, 2020 (amended on March 13, 2020) on Guidelines
for rights issue of units by a listed Real Estate Investment Trust (REIT)
73Annexure Volume I: Monetisation Guidebook NATIONAL MONETISATION PIPELINE
Copyright © NITI Aayog, 2021
NITI Aayog, Sansad Marg,
New Delhi-110001
Designed b y
NATIONAL
MONETISATION
PIPELINE
VOLUME I: MONETISATION GUIDEBOOK NATIONAL MONETISATION PIPELINE
NITI Aayog
Designed by
NATIONAL
MONETISATION
PIPELINE
VOLUME II: ASSET PIPELINE
VOLUME II vol-2_National Monetization Pipeline.indd 1vol-2_National Monetization Pipeline.indd 117/08/21 12:11 PM17/08/21 12:11 PM vol-2_National Monetization Pipeline.indd 2vol-2_National Monetization Pipeline.indd 217/08/21 12:11 PM17/08/21 12:11 PM NATIONAL MONETISATION PIPELINE
Volume II : Asset Pipeline
GOVERNMENT OF INDIA
NEW DELHI
vol-2_National Monetization Pipeline.indd 1vol-2_National Monetization Pipeline.indd 117/08/21 12:11 PM17/08/21 12:11 PM vol-2_National Monetization Pipeline.indd 2vol-2_National Monetization Pipeline.indd 217/08/21 12:11 PM17/08/21 12:11 PM
1.Context and Approach 1
1.1 Union Budget 2021-22 2
1.2 Centre’s Incentive Scheme for Capital Expenditure by States 3
1.3 National Monetisation Pipeline 5
1.4 Approach to NMP 6
2. National Monetisation Pipeline 11
2.1 Consolidated Pipeline 12
2.2 Sectoral break-up 13
2.3 Pipeline phasing 14
2.4 Share of overall asset base monetised 15
3. Sector – wise Pipeline 17
3.1 Roads 18
3.2 Railways 24
3.3 Power transmission 38
3.4 Telecom 45
3.5 Power generation 51
3.6 Natural gas pipelines 55
3.7 Petroleum, petroleum product pipelines & other assets 60
3.8 Warehousing assets 65
Contents
iiiContents
vol-2_National Monetization Pipeline.indd 5vol-2_National Monetization Pipeline.indd 517/08/21 12:11 PM17/08/21 12:11 PM 3.9 Mining assets 71
3.10 Airports 75
3.11 Ports 81
3.12 Sports stadia 87
3.13 Urban Real Estate Assets 92
954. Implementation Plan
Annexure 97
ivContents Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 6vol-2_National Monetization Pipeline.indd 617/08/21 12:11 PM17/08/21 12:11 PM LIST OF FIGURES
Figure 1: Imperative for Asset Monetisation 2
Figure 2: Key Contours of the Scheme for Special Assistance to States for Capital
Expenditure 4
Figure 3: NMP : Medium term road map for Monetisation 5
Figure 4: Schematic of NMP Approach 6
Figure 5: Sector wise Monetisation Pipeline over FY 2022-25 (Rs crore) 13
Figure 6: NMP – Share of sectors in terms of indicative monetisation value in NMP 14
Figure 7: Indicative value of the monetisation pipeline year-wise (Rs crore) 15
Figure 8: Indicative value of Roads Monetisation pipeline (Rs crore) 21
Figure 9: Region-wise key stretches included in the pipeline over FY 2022-2025 23
Figure 10: Pipeline phasing – Railway assets (Rs crore) 29
Figure 11: Monetisation of Track OHE infrastructure – transaction structure 32
Figure 12: Pipeline phasing – power transmission (Rs crore) 41
Figure 13: Proposed structure – PGCIL InvIT 42
Figure 14: Pipeline phasing – Telecom assets (Rs crore) 48
Figure 15: Monetisation pipeline phasing – power generation (Rs crore) 54
Figure 16: Pipeline phasing – Natural gas pipelines (Rs crore) 59
Figure 17: Pipeline phasing – Petroleum product / LPG pipeline & other assets (Rs crore) 64
Figure 18: Monetisation value – Warehousing (Rs crore) 68
Figure 19: Phasing of Monetisation pipeline – coal mining (Rs crore) 74
Figure 20: Phasing of Monetisation pipeline – airports (Rs crore) 78
Figure 21: Monetisation pipeline phasing – Ports (Rs crore) 85
Figure 22: Snapshot of the JLN stadium asset (New Delhi) 90
Figure 23: Implementation framework 96
vContents Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 7vol-2_National Monetization Pipeline.indd 717/08/21 12:11 PM17/08/21 12:11 PM LIST OF TABLES
Table 1: Asset class-wise approach adopted for indicative monetisation value 9
Table 2: Total Potential Asset Base for key asset classes 25
Table 3: Railway assets considered for monetisation 26
Table 4: Asset-wise phasing of monetisation value (Rs crore) 29
Table 5: Snapshot of Transaction structure 31
Table 6: Comparative assessment of COT Vs InVIT Models for monetising Freight
Corridor 37
Table 7: Phasing of monetisation value – Telecom assets (Rs cr) 48
Table 8: Project packages envisaged under Bharatnet 49
Table 9: Phasing of pipeline of power generation Assets (figures in MW) 53
Table 10: Operational Natural Gas Pipelines of GAIL (Common Carrier + Dedicated) 56
Table 11: Phasing of assets identified for monetisation 62
Table 12: Phasing of monetisation value – Petroleum product / LPG pipeline & other
assets (Rs cr) 63
Table 13: Phasing of monetisation value – Warehousing assets (Rs cr) 68
Table 14: Phasing of Mineral Blocks 73
Table 15: Assumed phasing considered for capex of identified airports 78
Table 16: Phasing for Airport assets identified for monetisation 79
Table 17: Passenger traffic (in FY 19 & 20) and existing capacity of the identified airports 80
Table 18: Pipeline of Ports projects over FY22-25 83
Table 19: Port Projects to be tendered out during FY2021-22 83
Table 20: Port Projects to be tendered out during FY2023-25 84
Table 21: Identified projects–Redevelopment of Colonies 92
Table 22: Identified projects–ITDC Hotel assets 93
viContents Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 8vol-2_National Monetization Pipeline.indd 817/08/21 12:11 PM17/08/21 12:11 PM AcronymDefinition
AAIAirports Authority of India
BOOBuild-Own-Operate
BOQBill Of Quantities
BOTBuild-Operate-Transfer
BPCLBharat Petroleum Corporation Ltd
BSEBombay Stock Exchange
BSNLBharat Sanchar Nigam Limited
CCOCoal Controller’s Organisation
CEOChief Executive Officer
CERCCentral Electricity Regulatory Commission
CILCoal India Limited
CODCommercial Operations Date
CPSECentral Public Sector Enterprise
CRWCLCentral Railside Warehouse Company Limited
CWCCentral Warehousing Corporation
DFCCIL Dedicated Freight Corridor Corporation of India Limited
DFIDevelopment Finance Institution
DWTDeadweight Tonnage
EPCEngineering, Procurement and Construction
ESGEnvironmental, Social and Governance
FBBFixed Broadband
FCIFood Corporation of India
List of
Abbreviations
viiList of Abbreviations
vol-2_National Monetization Pipeline.indd 9vol-2_National Monetization Pipeline.indd 917/08/21 12:11 PM17/08/21 12:11 PM FDIForeign Direct Investment
GAILGas Authority of India Limited
GISGeographic Information System
HAMHybrid Annuity Model
HPCLHindustan Petroleum Corporation Limited
IDBIIndustrial Development Bank of India
IOCLIndian Oil Corporation Ltd.
IPAInitial Portfolio of Asset
IRSDCIndian Railway Stations Development Corporation Limited
JLNJawaharlal Nehru Stadium
JNPTJawaharlal Nehru Port Trust
LFPLand Fall Point
LILOLoop-In-Loop-Out
LMTLakh Metric Tonnes
LNGLiquefied Natural Gas
LPGLiquefied Petroleum Gas
MCAModel Concession Agreement
MCLRMarginal Cost of Funds-based Lending Rate
MDOMine Developer and Operator
MFCMulti-functional Complexes
MIRAMacquarie Infrastructure and Real Assets
MIVMaritime India Vision
MMLHMulti Modal Logistics Hub
MMTPAMillion Metric Tonnes Per Annum
MTNLMahanagar Telephone Nigam Limited
MTPAMillion Tonnes Per Annum
MVAMega Volt Amp
NBFIDNational Bank for Financing Infrastructure and Development
NDCPNational Digital Communications Policy
NHAINational Highways Authority of India
NHPCNational Hydroelectric Power Corporation
NIPNational Infrastructure Pipeline
NITINational Institution for Transforming India
NLCNLC India Limited (formerly Neyveli Lignite Corporation Limited)
NMPNational Monetisation Pipeline
NRPNational Rail Plan
NSENational Stock Exchange
viiiList of Abbreviations Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 10vol-2_National Monetization Pipeline.indd 1017/08/21 12:11 PM17/08/21 12:11 PM NSECNetaji Subhas Eastern Regional Centre
NSSCNetaji Subhas Southern Centre
NSWCNetaji Subhas Western Centre
NTPCNational Thermal Power Corporation Limited
OFCOptical Fibre Communication
OHEOver Head Equipment
OMDAOperations, Management and Development Agreement
OMTOperate Maintain and Transfer
ONGCOil and Natural Gas Corporation Limited
ORROuter Ring Road
PEGPrivate Entrepreneurs Guarantee
PFCPower Finance Corporation
PFTPrivate Freight Terminal
PGCILPower Grid Corporation of India Limited
PNGRBPetroleum and Natural Gas Regulatory Board
PPPPublic-Private Partnership
PUAPipeline Usage Agreement
RECRural Electrification Corporation
REITReal Estate Investment Trust
RFPRequest for Proposal
RFQRequest for Qualification
ROWRight of Way
RPORenewable Purchase Obligations
RTMRegulated Tariff Mechanism
SAISports Authority of India
SARODSociety For Affordable Redressal Of Disputes
SEBISecurities and Exchange Board of India
SECISolar Energy Corporation of India
SJVNLSatluj Jal Vidyut Nigam Limited
SPVSpecial Purpose Vehicle
STPSSuper Thermal Power Station
TBCBTariff Based Competitive Bidding
TEUTwenty Feet Equivalent Unit
TOTToll-Operate-Transfer
TSATransmission Service Agreement
USDUnited States Dollar
WPIWholesale Price Index
ixList of Abbreviations Volume II: Asset Pipeline
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Approach
1
Context and Approach 1
vol-2_National Monetization Pipeline.indd 1vol-2_National Monetization Pipeline.indd 117/08/21 12:11 PM17/08/21 12:11 PM India’s National Infrastructure Pipeline (NIP) envisages an infrastructure investment of
Rs 111 lakh crore over the five-year period (FY 2020-25). Financing of infrastructure
investments at such scale necessitates a re-imagined approach and tapping alternative
financing through innovative ways.
As estimated by the Report of Task Force for NIP (2019), traditional sources of capital are
expected to finance 83–85%
1
of the capital expenditure envisaged under NIP. About 15-
17% of the aggregate outlay is expected to be met through innovative mechanisms such
as Asset Recycling & Monetisation and new long-term initiatives such as Development
Finance Institution (DFI).
Figure 1: Imperative for Asset Monetisation
As per NIP, asset recycling and monetisation mechanism may finance around 5-6% of the aggregate capex under NIP. In the wake of Covid – 19 however, there is a pressing need on the public outlay towards social sector priorities and economic stimuli initiatives, thereby necessitating exploring of alternatives mechanisms such as Asset Monetisation with an increased vigour.
1.1 U<> NION BUDGET 2021-22
GoI’s strong and continued commitment towards stepping up spending on infrastructure and keeping the investments planned under NIP on track, was reinforced in the landmark Union Budget 2021-22. A three-pronged strategy was laid out in the Budget: Firstly, by creating institutional structures; secondly, through a big thrust on Asset Monetisation, and thirdly by enhancing share of capital expenditure in central and state budgets. Key initiatives under the Union Budget 2021-22 that have laid the foundation for enhanced infrastructure investments include:
1 To be raised through budgetary resources debt from bond markets, banks and NBFCs; equity from
private developers, external aid multilateral and bilateral agencies and internal accruals of PSUs would
comprise 4–10% as per NIP document, DEA
2Context and Approach Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 2vol-2_National Monetization Pipeline.indd 217/08/21 12:11 PM17/08/21 12:11 PM Union Budget 2021-22 – Laying the foundation
!Development Finance Institution – The budget provided for establishing
a professionally managed DFI to act as a provider, enabler and catalyst of
infrastructure financing. Subsequently, the National Bank for Financing Infrastructure
and Development (NBFID) Bill, 2021 was passed. The bill enabled the creation of a
DFI – “NBFID”, as a corporate body with authorised share capital of Rs 1 lakh crore.
The central government’s share in the entity is envisaged to remain above 26%
(currently at 100%) and the Central Government envisages to capitalise this DFI
with initially Rs 20,000 crore. The central government will also provide guarantee
at a concessional rate of up to 0.1% for borrowing from multilateral institutions,
sovereign wealth funds, and other foreign funds. The budget envisioned the DFI
to have a lending portfolio of at least Rs 5 lakh crore in three years’ time.
!Asset monetisation – The Union Budget has laid out the importance of “monetising
operating public infrastructure assets for new infrastructure construction”. Towards this, the budget provided for preparing a “National Monetisation Pipeline (NMP)” of potential brownfield infrastructure assets and an “Asset Monetisation dashboard” for tracking the progress and to provide visibility to investors.
Union Budget
2021-22:
Asset Monetisation
mandate
Budget 2021-22 laid
significant emphasis
on infrastructure
development
Monetisation as
fnancing mechanism
for enhanced spending
on infrastructure
National Monetisation
Pipeline (NMP) as a
medium term
roadmap
Identifcation of
Assets and
ministries/entities
under the program
Dashboard for
tracking progress
Towards this objective, National Institution for Transforming India (NITI) Aayog has initiated
an exercise for creation of National Monetisation Pipeline (NMP).
1.2 CENTRE’S INCENTIVE SCHEME FOR CAPITAL EXPENDITURE
BY STATES
Capital expenditure creates employment, especially for the poor and unskilled, has a high
multiplier effect, enhances the future productive capacity of the economy, and results
in a higher rate of economic growth. Recognising the criticality of enhanced capital
expenditure on infrastructure, Government of India has undertaken several initiatives to
address the operational/commercial challenges faced by asset owners in undertaking
monetisation and to incentivize State Governments and State level entities in undertaking
monetisation.
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vol-2_National Monetization Pipeline.indd 3vol-2_National Monetization Pipeline.indd 317/08/21 12:11 PM17/08/21 12:11 PM Central Government launched a “Scheme for Special Assistance to States for Capital
Expenditure” as part of ‘Aatma Nirbhar Bharat’ package in September 2020 to boost
capital expenditure by state governments reeling under the financial impact of COVID-19
pandemic. Union Budget 2021-22 further announced that the Centre would take measures
to incentivise States to spend more on infrastructure and to incentivize disinvestment of
their public sector enterprises.
Under the Department of Expenditure,
Scheme, financial assistance is provided
to the State Governments in the
form of 50-year interest free loan.
This recently institutionalised Scheme
provides incentives to states for asset
monetisation and disinvestment by State
government/ entities. As an incentive for
asset monetisation, additional allocation
equivalent to 33% of value of assets
realised is envisaged to be deposited in
State consolidated funds or in account of State public sector enterprises owning the
assets. The allocation and disbursement is subject to the realised amount being necessarily
used for capital expenditure by States.
Figure 2: Key Contours of the Scheme for Special Assistance to States for
Capital ExpenditureIncentives for
—Disinvestment through minority
stake sale
—Listing of SPSEs and disinvestment of stake
—Privatisation (Strategic Disinvestment)
—Asset Monetization/Recycling
4Context and Approach Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 4vol-2_National Monetization Pipeline.indd 417/08/21 12:11 PM17/08/21 12:11 PM Monetization of assets unlocks their value, eliminates their holding cost and enables scarce
public funds to be deployed to new projects, thus speeding up the implementation of the
National Infrastructure Pipeline. Funds provided to the States under the scheme by the
Government of India shall be used for new and ongoing capital projects, for long term
benefit to the State. The funds may also be used for settling pending bills in ongoing
capital projects.
1.3 NATIONAL MONETISATION PIPELINE
Creation of National Monetisation Pipeline (NMP) is Government of India’s pioneering
initiative to establish a medium-term pipeline along with a roadmap for “monetisation-
ready” assets. Developed in the backdrop of the unprecedented Covid-induced economic
and fiscal shocks, NMP lists out assets and asset classes, under various infrastructure
ministries, which will be monetised over a period of time.
NMP provides ‘visibility’ on the volume of assets to be monetised and the potential
value that can be unlocked. The Government’s commitment to scale up infrastructure
investments despite the fiscal pressures reflects the critical role of infrastructure on the
overall economic growth and recovery and expected multiplier effect. NMP shall also
serve as a medium – term roadmap of the potential financing opportunities and drive
preparedness of public sponsor as well as private sector/ institutional investors towards
financing the infrastructure gap.
Figure 3: NMP : Medium term road map for Monetisation
Key Objectives of NMP are:
i. Serve as a medium-term roadmap for the line ministries and agencies
ii. Provide medium-term visibility to investors on infrastructure assets pipeline
iii. Provide a platform for ministries to track asset performance
iv. Bring in greater efficiency and transparency in public assets management
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vol-2_National Monetization Pipeline.indd 5vol-2_National Monetization Pipeline.indd 517/08/21 12:11 PM17/08/21 12:11 PM Report on NMP has been organised in two volumes (i) Guidance book for asset monetisation
(Volume I) and (ii) Roadmap for asset monetisation over the medium term, including the
pipeline of infrastructure assets (Volume II).
NMP Volume II focusses on the latter and provides an annual phasing of the asset
pipeline to be monetised along with the value over the four-year period – FY 2022 to
FY 2025. The NMP period has been kept co-terminus with the remaining period of the
National Infrastructure Pipeline (NIP).
1.4 APPROACH TO NMP
The NMP has been created on a best effort basis by aggregating the information provided by various stakeholders including line ministries, departments as well as assessments of secondary information available on existing infrastructure assets in each of the sectors.
A bottom-up approach has been adopted wherein the existing core infrastructure asset
base managed under central sector agencies was identified and mapped. The core
infrastructure assets covered include roads, ports, airports, telecom, railways, warehousing,
energy pipelines, power generation, power transmission, hospitality and sports stadiums.
Besides these conventional infrastructure sectors, assets from mining and housing
redevelopment sectors have also been included in the NMP owing to the potential of
these sectors to spur private sector investment and to enable tracking of transactions as
part of the Monetisation pipeline.
Monetization through disinvestment and monetization of non-core assets (such as land,
building, and pure play real estate assets) have not been included in the NMP. The
exhibit below provides an overview of the approach to drawing up the NMP:
Figure 4: Schematic of NMP Approach
Assets which are central to the business objectives of a public entity/ statutory body/ Government body and/or are being utilised for delivering infrastructure services to public/ users have been categorised as Core Assets for the purposes of monetisation.
For each sector, the NMP has been drawn up for the statutory bodies, public sector
enterprises and other such undertakings within the purview of ministries/ departments
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vol-2_National Monetization Pipeline.indd 6vol-2_National Monetization Pipeline.indd 617/08/21 12:11 PM17/08/21 12:11 PM of Govt. of India (‘Public Asset Owners)
2
. This is based on three key sets of information:
(i) Potential Asset Base, (ii) Assets considered for Monetisation and (iii) Indicative
Monetisation Value. A brief description of these three sets of information is listed below:
1. Potential Asset Base –‘Potential Asset Base’ refers to the infrastructure assets
under the purview of the central line ministries and CPSEs covered as part of the NMP exercise. Rather than focussing on the whole universe of assets under a ministry/ CPSE, the Potential Asset Base focusses on the assets that are sizeable and amenable to monetisation
3
. These include brownfield assets that are currently
operational as well as assets that are expected to be operational over the NMP period.
2. Assets considered for Monetisation – The ‘Assets considered for Monetisation’ are a part of the Potential Asset Base that is expected to be monetised over the NMP period (‘Assets for Monetisation’). The monetisation potential for asset
classes has been assessed based on multiple factors varying across sectors. This multi-factoral assessment has focussed on visible revenue streams, commercial potential, utilisation levels, investor appetite, ability to tap private sector efficiencies in operations and maintenance, policy focus to tap institutional investment in the sector. These factors differ from sector to sector and the assessment has been explained in detail in subsequent sections of this report.
3. Indicative Monetisation Value –The indicative monetisation value that is expected
to be realised by the public asset owner through the asset monetisation process, either in form of upfront accruals or by way of private sector investment, has been referred to as the Indicative Monetisation Value. It may be noted that several brownfield asset classes are proposed to be monetised through Operate Maintain and Develop (OMD) based models or assets where significant capex may be involved over transaction life towards augmentation or rehabilitation of assets. In such cases, estimated capex to be funded through private sector investment has been taken as indicative monetisation value. The value to the government hence may be in form of upfront consideration or by way of private sector investment. Under PPP based mechanisms, additional revenue streams that may accrue to the government towards revenue share and / or concession fee over and above the private investment has not been included as the same cannot be ascertained realistically at this stage.
Monetisation Value is only an indicative high level estimate based on thumb rule
estimates. Various approaches such as Market or Cost or Book Value or EV approaches as explained in this section have been adopted to determine indicative value of asset pipeline as applicable and available.
2 Currently includes only central government asset owners. Supplementary Volume for State level assets
is envisaged to be issued in due course
3 Further, for the purpose of the study, the Potential Asset Base has been restricted to a set of identified
entitles. Assets held via subsidiaries / step-down subsidiaries or JVs have not been included which may
be included later as necessary
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vol-2_National Monetization Pipeline.indd 7vol-2_National Monetization Pipeline.indd 717/08/21 12:11 PM17/08/21 12:11 PM The actual monetisation value will be determined based on detailed valuation or
feasibility studies (as may be applicable) at the stage of transaction structuring. Hence,
it would not be prudent to take the Indicative monetisation value as a reference rate
or value for any transactions in future. For certain assets, the potential for monetisation
may be limited or lower than estimates, while for certain assets significant upside
potential over the indicative Monetisation Value may exist which needs to be tapped
through appropriate structuring and instruments.
Further, the actual realization (whether by way of accruals or by way of private
investment), will depend on various factors and aspects such as transaction timing,
economic scenario, available capital and investor interest etc.
Following are the various approaches used to estimate the Indicative Monetisation Value
of the pipeline:
a. Market approach – Under the ‘market approach’, indicative value is determined based on comparable market transactions, wherever available, for the identified asset classes. For such transactions, the market value “per unit of asset” has been determined based on secondary review of reference transactions in the sector as may be available or applicable (such as per kilometre of roads, per ckt km of transmission asset, per MW of generation capacity etc.). The value is applied on the Assets for Monetisation to arrive at the Indicative Monetisation Value. The monetization value taken under the market approach has also been averaged out considering the range of quality/ marketability of assets available/ considered for monetization.
The market value based approach is only indicative and the actual consideration
that may accrue to the ministries/ CPSEs depends on the following factors:
(i) payment terms as envisaged under the instrument, (ii) market price discovery
through competitive bidding process (iii) the extent of assets monetised by the
ministries/ CPSEs
4
and (iv) asset quality.
b. Capex approach – The ‘Capex approach’ is considered for asset classes that may be monetised through PPP based models envisaging capex investment by private sector. In such cases, typically a sizeable capital expenditure towards expansion/ augmentation or improving the quality of infrastructure delivery is envisaged over the transaction life. Hence, in such cases the extent of private investment estimated towards such capex has been considered as indicative monetisation value.
The principle under the capex approach is that in the absence of the asset
monetisation transaction, the Public Asset Owner would have to incur the
outlay towards augmentation and O&M of the brownfield asset. Hence, this
approach captures savings to the Public Asset Owner by undertaking the asset
monetisation transaction. Additionally, revenue streams or proceeds may accrue
4 in case of InvIT transactions, this approach considers the total value of asset brought up for monetisation
(100% of the units), while the asset owner as sponsor of an InvIT may choose to monetize only a pre-
determined number shares/ units (resulting in upfront receipt of the proportional amount)
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PPP concession (such as revenue share, concession fee, premium, royalty, etc.).
Further, the actual capex towards such outlays will happen over 2-3 years, and
sometimes in phases over concession life. Hence, for the purpose of estimating
the Indicative Monetisation Value, phasing has been assumed over 2-3 years from
the year of tendering out of the project.
c. Book value approach – The ‘book value approach’ is considered in case of asset
classes where information on comparable market transactions or estimated capex investment is not available. Further, the book value of the assets has been estimated considering the average capex cost incurred to construct a similar category of asset adjusted for the age of the asset/ number of years of operation and other such variables.
d. Enterprise value approach – The ‘Enterprise value (EV) approach’ is considered
for assets where information on existing revenue stream is available or can be reasonably projected based on assumptions and / or available data on prevailing tariff for an asset / asset class. In such cases, Net Present Value (NPV) of discounted cashflows
5
has been worked out to determine indicative monetisation
value. However, it may be noted that the EV based valuation at this stage is high level estimate only and the actual reference valuation will be arrived at by the asset owners at the stage of transaction preparation and structuring.
The approach adopted under the NMP to arrive at the indicative monetisation
value across various asset classes is summarised in the table below. Specific
assumptions and explanation of approach has been captured in respective
chapters of this Volume.
Table 1:
Asset class-wise approach adopted for indicative monetisation value
S.No. Sector/ assetApproach to monetisation value
1 RoadsMarket approach
2 PortsCapex approach
3 AirportsCapex approach
4 RailwaysRailway stations – Capex approach
Passenger trains – Capex approach
Private freight terminals – Capex approach
Railway colonies redevelopment – Capex approach
Track infrastructure under DFCCIL – Book value approach
Track, OHE – EV approach
5 Power generation Book value approach
6 Power transmission Market approach
5 Discounting of cash flows at the operating level has been done for select sectors based on reasonable
growth estimates
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vol-2_National Monetization Pipeline.indd 9vol-2_National Monetization Pipeline.indd 917/08/21 12:11 PM17/08/21 12:11 PM 7 Natural gas pipelineEV approach
8 Product pipeline EV approach
9 Sports stadium Capex approach
10 Warehousing Capex approach
11 TelecomCapex approach for Bharatnet fibre assets
Market approach for tower assets
12 MiningCapex approach
13 Urban Housing
redevelopment Capex approach
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Monetisation
Pipeline
2
National Monetisation Pipeline 11
vol-2_National Monetization Pipeline.indd 11vol-2_National Monetization Pipeline.indd 1117/08/21 12:11 PM17/08/21 12:11 PM 2.1 CONSOLIDATED PIPELINE
The total indicative value of NMP for Core Assets of Central Government has been
estimated at Rs 6.0 lakh crore over the 4 year period, FY22-25
The estimated value corresponds to ~5.4% of the total infrastructure investment envisaged
under the NIP which is ~Rs 111 lakh crore and ~14% of the proposed outlay for Centre (Rs
43 lakh crore). This pipeline of assets has been phased out over a four-year period starting
FY 2022 up till FY 2025.
Asset monetisation is critical to attract the required quantum of capital into infrastructure
sector. However, monetisation needs to be viewed not just as a funding mechanism, but
as an overall strategy for bringing about a paradigm shift in infrastructure augmentation,
service delivery and maintenance. Resource and capital efficiencies of private sector
along with the ability to dynamically adapt to the evolving global and economic reality,
necessitates looking at Asset Monetization as the key to value creation in Infrastructure.
It presents an immense opportunity for public asset owners to deleverage the balance
sheets and easing of fiscal space to take up more greenfield infrastructure creation. In
terms of other longer-term benefits, it creates an enabling environment for participation
of long-term institutional investors in infrastructure asset management.
NMP – Coverage of Volume II
NMP Volume II includes projects/ assets of central government line ministries and CPSEs in infrastructure sectors with high monetisation potential. The sectors include roads, ports, airports, railways, warehousing, gas & product pipeline, power generation, power transmission, mining, telecom, stadium and hospitality infrastructure.
State governments, state-level entities and urban local bodies also have a sizeable
infrastructure asset base with significant monetisation potential. Prominent asset
classes thereunder include state highways, energy distribution infrastructure, intra-
state transmission networks, urban transport, bus depots, water supply & sewerage
networks, gas pipelines (in certain states), sports stadium and district level sport
complexes etc.
State assets have not been included in this compendium of assets. The process of co-
ordination and collation of asset information/ pipeline from states is currently ongoing
and Supplementary Volume for same is envisaged to be issued in due course.
NMP Volume I and II are expected to serve as a guidebook and template for states
to evolve a common framework and approach for monetisation of core infrastructure
assets.
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vol-2_National Monetization Pipeline.indd 12vol-2_National Monetization Pipeline.indd 1217/08/21 12:11 PM17/08/21 12:11 PM The breakup of the overall pipeline and the sectoral share is as provided in the figure below:
Figure 5: Sector wise Monetisation Pipeline over FY 2022-25 (Rs crore)
2.2 SECTORAL BREAK-UP
The aggregate asset pipeline over FY22-25 under
NMP is indicatively valued at Rs 6.0 lakh crore. The
overall sectoral contribution from FY 2022 to FY
2025 is shown in the Figure below. The top 5 sectors
(by estimated value) capture ~83% of the aggregate
pipeline value. These top 5 sectors include: Roads
(27%) followed by Railways (25%), Power (15%), oil
& gas pipelines (8%) and Telecom (6%). Roads and
Railways together contribute ~52% of the total NMP
value.
The assets and transactions identified under the NMP
are expected to be rolled out through a range of
instruments. The choice of instrument is determined
by the sector, nature of asset, timing of transactions
(including market considerations), target investor
profile and the level of operational and/or investment
control envisaged to be retained by the asset owner.20+ asset classes, 12+ line
ministries / departments
Top 3 sectors: Roads (27%)
Railways (26%) and Power
(15%) by value
Pipeline Phasing: 15% of
assets, value of Rs 0.88 lakh
to be rolled out in FY 21-22
Top 3 Asset classes: Toll
Roads, Railway Stations &
Transmission towers
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27%
Railways
25%
Power
Transmission
8%
Power Generation
7%
Telecom
6%
Warehousing
5%
Mining
5%
Gas Pipelines
4%
Other Pipelines
& other assets
4%
Aviation
3%
Urban Real Estate
2%
Ports
2%
Sports Stadiums
2%
Figure 6: NMP – Share of sectors in terms of indicative monetisation value in NMP
2.3 PIPELINE PHASING
In terms of annual phasing by value, 15% of assets with an indicative value of Rs 0.88 lakh
crore are envisaged to be rolled out in the current financial year i.e. FY 21-22. As has been
explained previously, the aggregate as well as year on year value is only an Indicative
Monetisation Value and the actual realization for public assets owners will depend on the
timing, transaction structuring, investor interest etc.
In case of PPP augmentation or redevelopment, the actual capex investment towards
the assets is expected to be phased out over 2-3 year period post award. Accordingly,
the pipeline phasing below assumes the actual envisaged capex phasing as the year of
accrual of monetisation value.
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162422
179544
167345
FY 22FY 23FY 24FY 25
Figure 7: Indicative value of the monetisation pipeline year-wise (Rs crore)
2.4 SHARE OF OVERALL ASSET BASE MONETISED
For any sub-sector, the scale of monetisation envisaged under the NMP (from FY 2022 to
FY 2025) is assessed in terms of “capacity/ volume of assets monetised
6
as a percentage
of the total capacity/ volume of asset held under public sector”.
Overall, as a strategy, the scale of monetisation under NMP has been envisaged based
on multiple factors and bulk of the asset base, will remain with the government. Further,
under the framework for core asset monetisation, the assets monetised will be handed
back at the end of transaction life.
Bulk of asset base will
still remain with the
Government
Even as significant private sector participation is being undertaken
for operation and maintenance of brownfield infrastructure
assets, bulk of assets continue to remain with public sector
entities. Further, the addition of new/greenfield assets using the
funds so raised continues to ensure significant share of public
sector entities in such sectors.
Scale of monetisation
is impacted by both
demand and supply
factors
While the monetisation scale, aggregated at the sectoral level,
presents a reasonably promising picture, any scaling up beyond
the identified levels could face the following demand- and
supply-side challenges:
Monetisation potential of toll road assets, though being a market-tested asset class with established monetisation models, is limited by the percentage of stretches having four-lane and above configuration. The total length of national highway (NH) stretches with four-lane and above is estimated to be about 23% of the total NH network
6 Defined in terms of the basic unit of asset. For example: length of roads in km (for road sector), number
of railway stations, circuit km (ckm) of transmission network (power transmission) etc.
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In case of thermal and gas-based power generation assets,
there could be a limited appetite from global investors
considering the overall aim to achieve net zero carbon
emissions by 2050, consequent targets set for investment
portfolios and a shift towards greater Environmental, Social
and Governance (ESG) compliance.
Volumes are
not necessarily
correlated to value
Volumes are not necessarily correlated to value. While, the
number of railway station assets considered for monetisation
under the NMP constitutes about 5% of the total number of
railway stations in the country, in value terms the railway
station re-development is one of the front-runner asset classes
contributing almost Rs 76,250 crore (12% of the total NMP value).
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Pipeline
3
Sector – wise Pipeline
17
vol-2_National Monetization Pipeline.indd 17vol-2_National Monetization Pipeline.indd 1717/08/21 12:11 PM17/08/21 12:11 PM 3.1 ROADS
Summary
26,700 km20% Rs 1,60,200 crore 27%
Asset Length to
be monetized
Asset Length as
a percentage of
Potential Asset
Base (%)
Indicative
Monetisation
Value over FY
2022-2025 (Rs
crore)
Share in overall
NMP in value
terms (%)
3.1.1 Potential Asset Base
The Ministry of Road Transport and Highways is the central line ministry responsible for
development of National Highways. Works relating to National Highways are undertaken
under different central government schemes, such as the Bharatmala Pariyojana,
Development of Road in Left Wing Extremism affected areas, Special Accelerated Road
Development for North Eastern Region, Inter-Connectivity Improvement Programme, etc.
taking into account their impact on tourism potential, trade potential areas, strategic,
tribal, remote and border areas. The National Highways Authority of India (NHAI) is the
flagship central sector entity set up in year 1995 through an Act of Parliament, the National
Highways Authority of India Act, 1988. NHAI is responsible for development, maintenance
and management of National Highways entrusted to it. In the recent years, the Ministry
of Road Transport and Highways (MoRTH) have made impressive gains in pacing up the
award and construction of NHs every year. For example: the MoRTH reported an annual NH
construction of over 13,327 km during FY 2021, translating to an average of ~35 km/day.
The Potential Asset Base for roads sector includes aggregate National Highway (NH)
road length estimated at about 1,36,155 km
7
as on December 20, 2020. In terms of lane-
wise distribution of NHs as on March 31, 2019, of the total NH network, 23% (~31,067 km)
is comprised of four-laned roads
8
and above, 49% are two-laned roads, and the rest are
comprised of roads with less than two lanes. The NH construction is undertaken through
three modes viz. EPC, BOT and HAM. It is estimated that in recent years, majority of the
projects are being awarded through EPC and HAM mode and NHAI retains the tolling
rights over these stretches (and hence amenable for monetisation). The NH network of 4
lane and above configuration, where NHAI reserves tolling rights, has been considered as
amenable for monetisation for the purpose of identification of asset under NMP.
7 https://pib.gov.in/PressReleasePage.aspx?PRID=1684574
8 https://pib.gov.in/PressReleasePage.aspx?PRID=1575395
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Precedence of monetisation transactions and frameworks: Roads and highways,
as an asset class, has steadily developed a solid track record of monetisation. The
monetisation of operating road assets has generated growth capital for construction
of new roads under the Bharatmala programme, in line with the NHAI’s mandate to
diversify its funding for financing growth. Since 2017, the NHAI has been successfully
monetising its brownfield road assets through Toll Operate Transfer (TOT)-based PPP
concessions. The TOT model has since matured and is now an established model with
a model concession framework already in place. Another method of monetisation that
has seen traction in the recent past is the InvIT model. A number of road assets have
been monetised through InvITs by private sector players.
Evolved regulatory framework – The regulatory framework for roads sector especially
that for PPP Projects including the NHAI’s Model Concession Agreement, has
strengthened considerably over the last decade. Pursuant to enabling framework/
provisions by NHAI, multiple portfolio buyouts have been completed in the roads
sector unlocking capital and enhanced participation of institutional investors. Key recent
policy decisions and actions relating to BOT (Toll) Model, TOT Model and HAM taken
during 2020, which will further resolve impediments and enhance investor interest in
toll roads as an asset class are
9
:
i. Changes in Model Concession Agreement (MCA) of BOT (Toll) Project:
Considering the key challenges faced by stakeholders, changes in the BOT (Toll) framework have been undertaken keeping in mind the reforms related to project preparation and conditions precedents, dispute resolution and limitation of liability, ease of doing business, incorporation of new policies such as policy for harmonious substitution, policy for resolution of stuck projects etc. Also other miscellaneous reforms such as use of latest technology for traffic and road condition monitoring have been issued (Ministry’s OM No. NH-35014/25/2017-H dated 24.08.2020 and 25.08.2020).
ii. Changes in MCA of TOT framework: Change in the MCA of TOT Model allaying concerns of investors and stakeholders.
iii. Changes in MCA of HAM model: In order to address the issues relating to NH
Projects under Hybrid Annuity Mode (HAM) raised by stakeholders, changes in the provisions relating to change in ownership (exit option), shifting of utilities, maintenance during construction period, financial close, payment during construction period, applicable bank rate, mobilization advance, termination payment and dispute resolution etc. in the MCA of HAM have been made, and revised MCA of HAM incorporating these changes has been issued .
9 https://pib.gov.in/PressReleasePage.aspx?PRID=1684574
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electronic tolling, etc., and the palpable behavioural change seen in the adherence to
these initiatives, will usher in greater transparency in the asset management process
and significantly improve user “willingness to pay”.
This will result in asset aggregators with sound corporate governance practices, such
as Infra focussed PE funds, sovereign wealth funds, pension funds, etc., participating
in operational road assets with established base traffic
Thus, existing asset owners such as the NHAI will be able to effectively churn their
investments and perpetuate a virtuous cycle of “build, commission and monetise” to
generate growth capital for fresh investment
3.1.2 Assets considered for monetisation
The aggregate length of assets considered for monetisation over FY 2022 to 2025
aggregate to 26,700 km. This is based on the length of already/ to-be operational, four
lane highways and above in the country, entailing potential for revenue generation and
thereby monetisation.
The highways which will become operational over the NMP period have also been
considered as part of the monetisable asset base once these assets see a seasoning in
their performance viz. completion of one-two years of operations post establishment of
base traffic. Based on past trend in pace of award and construction, it is estimated that
NHAI every year is incrementally adding minimum of 2,000 – 3,000 km of monetizable
toll roads to its asset base every year.
The total length of highway assets considered for monetisation (26,700 km) constitutes
around 22% of the total NHs (estimated to be about 1,21,155 km) excluding the network
operated by private sector under BOT (Toll) based PPP concessions.
Approach to monetisation
Step 1 – Assets considered for monetisation
Both existing operational NH assets and new NH roads which are constructed and
operationalised over the next four years
10
have been considered. This is based on
the list of stretches received from the Ministry coupled with secondary research on
potential for monetizable four-lane and above assets.
The operational NHs constructed under EPC and HAM modes, especially in the 4-lane
and above category have been considered for monetisation. This includes both the
existing toll roads and potential toll roads to be added over the NMP period. As
10 This includes the under-construction road assets and the new roads to be awarded over the next 1-2 year
and getting monetized within the NMP period
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11
mode is
estimated to add up to ~16,387 kms
12
.
The total assets considered for monetisation over the 4 year period from FY 2022 to
FY 2025 aggregate to ~26,700 km.
Step 2 – Arriving at the indicative monetisation value.
The indicative monetisation value has been estimated based on the ‘Market approach’.
The multiple (in Rs crore per km) to estimate the indicative value is based on the
average blended factor at Rs 6 crore per km. The estimate has been arrived at based
on (i) recent TOT transactions
13
(ii) asset mix to be monetised (iii) scale of monetisation.
The average realisation by NHAI under past TOT concessions successfully awarded has
been in the range of Rs 9-14 crore per km. A lower range at Rs 6 crore per km has
been assumed to assess indicative monetisation value to factor in certain lower traffic
stretches in the portfolio and impact of scale on monetisation.
The annual monetisation value has been arrived at by multiplying the annual phasing
of assets considered for monetisation (in kms) and the multiple (in Rs. Crore per km)
3.1.3 Indicative Monetisation Value of assets and phasing
The total Indicative Monetisation Value of assets considered for monetisation is estimated
at Rs 1.6 lakh crore from FY 2022 to 2025. The asset pipeline has been phased out over
the NMP period to ensure better preparedness and improved marketability. The summary
of annual phasing is as follows:
Figure 8: Indicative value of Roads Monetisation pipeline (Rs crore)
11 The BOT (toll) projects awarded under the PPP mode have been excluded as tolling rights on these
assets are retained by the private sector for the respective concession periods and hence cannot be
considered a relevant part of this monetizable universe.
12 https://tis.nhai.gov.in/faq?language=en
13 TOT 1 was awarded at Rs. 14 crore per km, TOT 3 at Rs. 9 crore per km and the recent TOT 5 at Rs. 14
crore per km.
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vol-2_National Monetization Pipeline.indd 21vol-2_National Monetization Pipeline.indd 2117/08/21 12:11 PM17/08/21 12:11 PM Marquee Project: NHAI’s Infrastructure Investment Trust (InvIT)
In order to enhance NHAI’s resource mobilization, the Cabinet accorded the approval
and authorized NHAI to set up Infrastructure Investment Trust, as per InvIT Guidelines
issued by SEBI, to monetize completed National Highways that have a toll collection
track record of at least one year.
Background
!NHAI is in the process of monetising its completed and operational highway
projects under the Infrastructure Investment Trust route to mobilise additional
financial resources through the capital markets.
!NHAI InvIT has been set up with the objective of monetising its selected completed and operational NH projects through alternative sources such as capital markets and diversification of its investor base.
!Selected operational portfolio of projects will be held through an SPV. SPV thus constituted is envisaged to execute a concession agreement with the NHAI for the said projects.
!NHAI InvIT issue is envisaged to be privately placed. Indicative value of the NHAI InvIT fund raise from the current tranche underway is about Rs 5,000 crore. The fund-raise and issue listing is expected to be completed during FY 22 subject to market conditions and stabilisation of toll revenues in wake of covid.
Key features
!The first tranche of InvIT are expected to consist of ~586 km of NH assets in Rajasthan, Gujarat, West Bengal, and Bihar. A second tranche of follow on issue of the InvIT is also being explored by NHAI.
!A new entity wholly-owned by the NHAI, the National Highways Infra Investment Managers Private Limited (NHIIMPL), has been incorporated to act as the Investment Manager under the proposed InvIT transaction.
!The InvIT activities will be managed by the Investment Manager entity, NHIIMPL, which has been staffed with a team of competent industry experts.
!The Board of the Investment Manager comprises independent directors and professionals with extensive private sector experience in operational road assets/capital market-related transactions/fund management. This is critical to ensure the functioning of the NHIIMPL with a reasonable level of independence for the benefit of investors, thereby offering them requisite comfort.
Key timelines and way ahead
!SEBI in-principle approval for registration of NHAI InvIT was obtained in June 2020.
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!Project Manager and Investment Manager have been incorporated in September
2020.
!Concession Agreement between the SPV and NHAI has been approved in February 2021.
!Marketing and investor consultations – ongoing
!The first tranche of NHAI InvIT transaction is expected to be completed by Q2/Q3 of FY2022 subject to market conditions and stabilisation of toll revenues in wake of covid.
The indicative transaction structure of NHAI InvIT is provided in the figure below.
Sponsor (NHAI)Unit Holder
NHAI InvIT
SPV
Project 1 Project 2 Project 3
Investment
Manager
Trustee
Project Manager
Merchant
Banker
Project n
UnitsUnits
100%
Figure 9: Region-wise key stretches included in the pipeline over FY 2022-2025
Detailed list of stretches is set out in Annexure I.
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Summary
Rs 152,496 crore26%
Indicative Monetisation Value
over FY22-25
Share in overall NMP in value
terms
Key assets for monetisation over FY22-25 (% of Potential Asset Base)
Railway stations400 Nos. (5.5% of stations)
Passenger trains90 Nos. (5% of total trains)
Railway track1 route of ~1,400 km (2% of network)
Konkan Railways741 km
Hill Railways4 Nos. , 244 km route
Railway owned Good-sheds 265 Nos. (21% of total good sheds)
DFC track and allied
infrastructure
673 km (20% of total DFC network)
Others–Railway colonies
and stadiums
15 Railway stadiums & selected Railway Colonies
3.2.1 Potential asset base
Indian Railways (IR) is the fourth-largest railway network in the world by size, with 121,407
km (75,439 mi) of total track over a 67,368 km route. With IR’s focus on augmenting
railway infrastructure to facilitate freight and passenger movement, significant investments
will be needed to address capacity constraints. The Potential Asset Base considered
includes assets owned and operated under the Ministry of Railways (MoR) (including
identified PSUs and entities under MoR). The key assets across categories relevant to the
monetisation process are shown in the table below.
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14
S.NoAsset classValue
1 Railway stations7,325 nos.
2 Passenger trains13,169 nos.
3 Track infrastructure
(route length)
67,956 km
4 Existing Railway owned Goods sheds 1,246 nos.
5 Hill railways5 nos.
6 Total length of Eastern & Western Dedicated Freight Corridor
(DFC), excl. Sonnagar Dankuni section on PPP mode – target
date of commissioning is June 2022
15
2,843 km (Eastern –
1337 kms, Western
– 1506 kms)
Factors influencing monetisation of asset classes:
High commercial potential of the assets and a massive footprint – IR assets (especially
railway stations, MFCs, goods sheds, etc.) are typically centrally located in prime
locations having high commercial potential due to the presence of such assets in
key urban centres or strategic significance (e.g. access to key logistics corridors and
providing last-mile hinterland connectivity). This commercial potential remains largely
underutilised and is expected to whet investor appetite.
Dedicated institutional arrangements to drive the monetisation agenda –Railway
station development agenda lies at the heart of the sector’s monetisation drive. The
presence of a dedicated SPV – Indian Railway Stations Development Corporation
(IRSDC)
16
along with RLDA – to develop new stations and redevelop existing Indian
railway stations helps streamline the process.
PPP Framework: In order to standardise PPP framework for Railway Projects, model
concession agreements (MCA) for various projects viz. station redevelopment, private
passenger train etc have been developed. This is to provide a balanced risk sharing
framework and thereby ensure predictability and bankability of transactions. Similar
frameworks and documents need to be developed for brownfield PPP models such
as OMD and TOT-based concessions for other railway assets identified under NMP.
Mechanisms to address asset-specific challenges important to scale up monetisation
– The key impediments to the monetisation process are asset-specific challenges
(e.g. presence of an identifiable revenue stream) and measures to help private sector
manage risks effectively. This is specifically relevant to the railway sector, which has
seen limited penetration of PPPs as a mode of project delivery. Key asset classes and
the influencing factors include the following:
14 http://indianrailways.gov.in/railwayboard/uploads/directorate/stat_econ/Annual-Reports-2019-2020/
Year-Book-2019-20-English_Final_Web.pdf
15 https://dfccil.com/Home/ProgressStatusImage accessed on May 28, 2021
16 IRSDC is a joint venture between IRCON and RLDA with a 51:49 equity shareholding ratio
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aKonkan Railway – Multiple stakeholders, including state governments, own
stake in the entity. Hence, existing shareholder interests need to be managed
effectively before shaping the monetisation transaction structure.
aTrack, OHE – The track infrastructure presently is majorly for exclusive and
captive use of Indian Railway operations with earnings coming in form of passenger and freight income. At present there is no concept of apportionment of a track access charge towards use of track. A monetisation mechanism will need to structure an infrastructure access and usage agreement along with ringfencing a Track Access Charge based revenue regime.
aPrivate Passenger Trains – Bidding for 150 trains is presently underway and
the project is expected to be awarded in FY 22, any scaling up effort will be based on successful award and experience from the current batch of PPP clusters.
Clearly identified project pipeline – The NIP and the Draft National Rail Plan (NRP)
2020 provide a detailed asset-level plan for the development of the railway sector. The NIP envisages a total capex of Rs 13.7 lakh crore by both the centre and states over FY 2022-25, of which Rs 1.6 lakh crore is envisaged through the PPP mode. The Draft NRP 2020 provides a strategic direction to the sector for the next 30 years, which includes an increase in the modal share (freight) of railways from 26% to 45%, while continuing to provide best-in-class services for passengers.
3.2.2 Assets for Monetisation
The railway assets considered for monetisation over FY 2022-25 are as explained below.
Table 3:
Railway assets considered for monetisation
S.No. Asset type FY22 FY23 FY24 FY25 Total
1
Railway station
development
40 stations
120
stations
120
stations
120 stations
400
stations
2
Passenger train
operations (PTO)
— 30 trains 30 trains
30 trains 90 trains
3 Track – OHE InvIT — 1,400 km —
— 1,400 km
4 Good Sheds— 75 nos. 100 nos.
90nos. 265 nos.
5 Konkan Railway — — 741 km
— 741 km
6 Hill Railways 2 nos. 2 nos. —
— 4 nos.
7
Dedicated Freight
Corridor
— — 337 km
337 km 673 km
8 Railway Stadiums 3 nos. 5 nos. 5 nos.
2 nos.
15
stadiums
9 Railway Colonies — — — —
Numbers
not
provided
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Railway station redevelopment
!Assets considered for monetisation – The number of railway stations taken up
for monetisation was arrived at based on GoI’s Railway Station Redevelopment
Program which envisaged redevelopment of 400 railway stations identified by
Ministry of Railways. The railway stations were divided into three categories (Tier 1:
50 stations, Tier 2: 100 stations, and Tier 3: 250 stations) based on the commercial
potential and potential scale of development.
!Indicative Monetisation Value – It has been arrived at based on Capex approach, i.e., the capital cost towards the redevelopment of railway stations. The capital cost per railway station was arrived at based on the estimates for 97 railway stations identified under the Draft NRP 2020. The median capex per railway station is around Rs 400 crore. With this as the base, capex per railway station for the three categories of assets was estimated as follows: Tier 1 – Rs 500 crore per station, Tier 2 – Rs 300 crore per station, and Tier 3 – Rs 85 crore per station.
Passenger train operations
!Assets considered for monetisation – The number of projects to be taken up for
monetisation is based on ongoing tenders and proposed plans of IR. Bidding for first set of clusters envisaging ~150 passenger trains to be operated by private operators across 12 clusters and 109 O-D pairs of routes is presently underway. The project is currently under bidding stage and the concession is expected to be awarded in FY 2022. These trains are expected to be introduced in a phased manner over FY 2023-25 period. Of these, ~60% of trains (~90 trains) are expected to be operationalised and deployed during NMP period i.e. FY22-25.
!Indicative Monetisation Value – It has been arrived at based on Capex approach
– capital cost towards acquisition of rolling stock plus an additional mark-up towards establishment and other PPP incidentals have been assumed. Additional revenue streams that may accrue to the Railways in form of revenue share and upfront premium if any under the PPP mechanism has not been included in the monetisation value.
Track, signalling, and Overhead Equipment (Track OHE) InvIT
!Assets For monetisation –The objective of proposed framework is to monetise existing railway infrastructure i.e. track, signalling, OHE etc across defined railway routes as a packaged asset. These railway infrastructure assets are currently utilised by IR with a potential for private sector operators also joining the fray in the near future. The monetisation of one major O-D route is envisaged under the NMP as a pilot project, which would serve as the framework for other profitable routes.
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!Indicative Monetisation Value – It has been arrived at based on EV approach by
carrying out a DCF based cashflow projection for a period of 25 years factoring
in assumptions and available data on assumed Track Access Charge, number of
trains plying, operating cost and renewal expenses. The same is only an indicative
number at this stage and the detailed valuation may be carried out at the feasibility
and transaction structuring stage. Further, for the purpose of NMP, it has been
assumed that during the NMP period, about 85% of the units of the proposed
InvIT will be divested and a proportionate enterprise value has been assumed.
Private Freight Terminals (PFTs)
!Assets For monetisation – As per Draft NRP 2020, IR manages 1,246 railway-
owned goods sheds. It is envisaged that the assets in major locations (especially in and around major urban centres), totalling 265 nos. (i.e. 21% of total good sheds), may be monetised by inviting private sector participation in augmentation & O&M of these good sheds as private freight terminals.
!Indicative Monetisation Value – It has been arrived at based on capex approach. The NRP lays out an investment plan of Rs. 10,402 crore for developing around 170 greenfield terminals, translating to ~Rs. 60 crore per terminal. Considering the level of capex for upgradation of existing facilities is relatively low, a capex of about Rs. 21 crore per good shed has been derived and considered for arriving at indicative monetisation value. The 265 good sheds considered for monetisation have been phased out over the NMP period starting with 75 good sheds in FY 23.
Monetisation of track and allied infrastructure of Dedicated Freight Corridor of
DFCCIL
!Assets For monetisation – Based on current DFCCIL capex plans, it is estimated
that 2,843 km of DFCCIL corridors (excluding the PPP section) are expected to
be fully commissioned by June 2022
17
. Once fully commissioned, it is assumed
that DFCCIL will monetise ~673 km of track (either by way of grant of TOT like
concessions to private players or through InvIT transaction with revenue in form
of Track Access Charge) starting from FY 2024 onwards.
!Indicative Monetisation Value – Since detailed traffic and revenue projections for DFCCIL are not available at this stage, the indicative monetisation value for DFCCIL has been arrived at based on the Book Value approach i.e. taken at capital cost towards construction of existing DFCCIL corridors. The capital cost per km was estimated at Rs 30 crore (adjusted for land cost) based on ongoing capex costs.
Other assets: Konkan Railway, Hill Railways, Railway Stadiums and colonies
!Assets for Monetisation – The specific assets considered for monetisation have been selected based on the following factors: (i) profitability of routes, (ii) potential
17 https://dfccil.com/Home/ProgressStatusImage
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Railways networks), (iii) potential for improved O&M standards and utilisation of
sports stadiums.
!Indicative Monetisation Value – It has been arrived at based on EV approach for
Konkan Railway and capex approach for Hill Railways and Railway stadiums. For Railway colonies and stadiums, Capex data provided by Ministry of Railways has been considered for inclusion in the pipeline.
3.2.3 Indicative Monetisation Value of assets and phasing
The Indicative Monetisation Value is estimated at Rs 1,52,496 crore over the NMP period FY2022-25. Asset-wise phasing and values are provided in the table below.
Table 4 : Asset-wise phasing of monetisation value (Rs crore)
S.No. Asset typeFY22 FY23 FY24 FY25 Total
1 Railway station development 17,000 29,325 17,575 12,350 76,250
2 Passenger train operations — 7,002 7,212 7,428 21,642
3 Track – OHE InvIT— 18,700 — — 18,700
4 Good Sheds— 1,575 2,100 1,890 5,565
5 Konkan Railway— — 7,281 — 7,281
6 Hill Railways460 170 — — 630
7 Dedicated Freight Corridor — — 10,089 10,089 20,178
8
Railway Colonies
redevelopment
350 450 650 800 2,250
TOTAL 17,810 57,222 44,907 32,557 1,52,496
The figure below depicts the annual phasing of the assets by total value generated.
Figure 10: Pipeline phasing – Railway assets (Rs crore)
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A. S<> tation Redevelopment Programme
Redevelopment of railway stations across India is a priority agenda of Ministry of Railways,
Government of India. Indian Railways has initiated the redevelopment of railway stations
with the primary objectives of providing world class passenger amenities, making them
hubs of economic development and re-establishing them as the nerve centres of cities.
This initiative is being driven by the Government with the participation of private players as
a part of PPP projects. This is envisaged to be achieved through leveraging the commercial
development opportunity of land and air space surrounding the station and to create
seamless travel and facilities experience to passengers with the aim to future-proof these
important travel nodes.
Salient features and key locations
B. Priv<> ate participation in Passenger Train Operations
Indian Railway (IR) has launched the project to invite private participation in running of
passenger trains over its network. Indian Railway (IR) is one of the world’s largest railway
systems and the passenger business is estimated to be worth $ 7.5 billion annually. The
passenger demand for IR is robust as it has withstood long term modal shifts and has
consistently reported unserved demand levels of ~15% in form of waitlisted passengers.
The cluster of projects identified envisages private train operations on ~109 pair of routes
structured as 12 clusters with a targeted private investment of Rs. ~30,000 crore. The
project will incrementally add over 150 modern trains to the IR system. The clusters in the
current set of packages being bid out are dense demand routes and include Delhi-Mumbai,
Delhi-Chennai, Mumbai-Chennai among others. The Model Concession Agreement guiding
principles for the private passenger train operations has already been developed. Based
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more routes in future.
The bidding process for a batch of 12 clusters has been undertaken.
Salient features and clusters in the Private Passenger Train Operations project
3.2.5 Overview of other railway assets
This section comprises of an overview of other railway asset classes that have been
identified and included in the pipeline. Some of these transactions are in the preparatory
stage hence the structures and modalities for monetisation are indicative in nature and
may evolve based on detailed transaction due diligence.
A. T<> rack, Signalling, and Overhead Equipment (OHE) infrastructure
Indian Railways (IR) with its network of over 67,000 route kms is the world’s fourth largest railway network in terms of size. Ministry of Railways may explore monetisation of its operating track infrastructure bundled with signalling and OHE/ TRD (Traction & Distribution) assets for selected origin-destination (O-D) pair through a structured financing mechanism. InVIT based structure may be explored for monetisation of this asset class. Besides, monetisation of track infrastructure, improvement in operating efficiency in long term is one of the key objectives guiding the transaction.
Table 5 :
Snapshot of Indicative Transaction structure
Asset Bundle
Track infrastructure bundled with signalling and OHE/ TRD assets
(specified assets) for a selected origin-destination (O-D) pair
Indicative
monetisation
instrument
Infrastructure Investment Trust
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Structure
Creation of an SPV for holding long term rights to earn Track
access charge (TAC) revenue from IR for the specified asset bundle
SPV’s TAC revenue stream to be monetised by creation of an InvIT sponsored by IR, units of InvIT divested under a private placement/public listing
Maintenance payments (for routine/major upgrades to be borne by the SPV on pre-defined terms)
Project manager may undertake O&M by subcontracting to IR
Revenue model
Pre-determined Track Access Charges (TAC) (Rs per train km) paid by IR to the SPV
Traffic guarantee from IR may be explored to provide predictability of operating environment to SPV
O&M charges paid
to IR by SPV
O&M responsibility of the asset bundle retained by IR who is
appointed as the Project Manager by the InvIT
Fixed annual amount, which may be escalated at a pre-specified rate
A variable component may be linked to performance and efficiency
Pre-specified outgo may be apportioned towards renewal and major maintenance expenditure
Status
Transaction Structuring underway
The structure enables IR to tap domestic and foreign long-term capital at competitive
cost of funds. Divestment of units of the InVIT provides upfront capital proceeds to IR
as the sponsor, O&M expenses as sub-contracting revenue, and dividend income on the
residual equity holding in InvIT. TAC (Track access charge) linked to utilisation incentive
and availability. The figure below provides an overview of the transaction structure.
Figure 11: Monetisation of Track OHE infrastructure – indicative transaction structure
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Multi Modal Logistics Hubs
IR allows PFTs on railway land adjacent to stations with a view to utilising vacant land
parcels better, increasing PPP investments, and boosting freight revenue. Commercial
viability of private terminals is higher in case of terminals’ proximity to cement industries,
ports, and power plants, which are key consumption centres. At present, private freight
terminals are built by private investors on private land, and connectivity is provided by
railways to the operators on lease.
During October 2020, Ministry of Railways issued a Policy
18
on Development of Goods
sheds aiming at augmenting terminal capacity through private participation by allowing
setting up of new goods-shed facilities and developing existing railway owned goods-
sheds at a larger number of stations.
Salient features of the Good Sheds Policy of IR
Private parties permitted to develop goods wharf, loading/unloading facilities, facilities
for labour (resting space with shade, drinking water, bathing facilities, etc) approach
road, covered shed and other related infrastructure. The facilities are to be created/
developed through the private investment.
Developments for the proposed facility to be as per approved Railway designs,
standards and specifications.
The facilities created by the private party shall be used as common user facility, and
no preference or priority will be granted to the traffic of the party over the traffic of
other customers.
Responsibility for maintenance of assets and facilities created shall be vested with the
party during the agreement period.
Incentives under the scheme: Share in the Terminal Charges (TC) and Terminal Access
Charges (TAC), as the case may be, for all the inward and outward traffic dealt at the
goods-shed for five (05) years, from the date of completion of the work.
The party seeking the least share (TC/TAC) to be selected through competitive bidding.
Additional revenue–utilization of available space for establishing small canteen/tea-
shop, advertisements, etc.
C. Hill R<> ailways
The Mountain railways of India consists of fully functional and operational railways networks in mountains and hilly terrains in India. The key assets are: Darjeeling Himalayan Railway located in the foothills of the Himalayas in West Bengal, the Nilgiri Mountain Railways located in the Nilgiri Hills of Tamil Nadu, the Kalka Shimla Railway located in the Himalayan foothills of Himachal Pradesh and the Matheran Railway located in Maharashtra. These locations are domestic tourism hubs with a heritage based appeal to these railways.
18 https://pib.gov.in/PressReleasePage.aspx?PRID=1664798
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infrastructure may require rehabilitation and augmentation investment. The station and
adjoining real estate on the Railway land may be bundled along with train operations to
bring in viability and commercial attractiveness. Snapshot of a PPP based transaction
structure is as below.
Snapshot of Indicative Transaction structure:
D. Dedicated Freight Corridor (DFC)
DFCCIL, an SPV, was established in 2006 under the administrative control of the MoR
to undertake planning, development, mobilisation of financial resources, construction,
maintenance, and operations of Dedicated Freight Corridors (DFCs). The two DFCs under
implementation – Eastern and Western – are being funded through a mix of equity from
the MoR and loan from multilateral development banks – the World Bank and the Japan
International Cooperation Agency (JICA). These two DFCs, with an estimated project
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funded through (a) JICA loans (47%), (b) World Bank loans (17%), and (c) the MoR’s
equity contribution (36%). The Western DFC is primarily funded through loans from the
JICA and equity from the MoR, whereas the Eastern DFC is being funded through loans
from the World Bank and equity from the MoR. DFCCIL is planning to develop a section
of the Eastern DFC (Sonnagar-Dankuni) via the PPP mode.
In terms of revenue model, the key customer of DFCCIL would be IR, with DFCCIL earning
revenue through a TAC mechanism. IR would decide the trains that would run on the DFC
network. Freight booking would be done through IR, which would then assign traffic to
the DFCs. TAC would be determined by DFCCIL in a way that it covers fixed and variable
components of providing and maintaining track infrastructure.
Overview of Eastern and Western DFCs
The Western DFC project comprises 1,504 km of a double-line electrified track from JNPT
to Dadri via Vadodara-Sanand-Palanpur-Phulera-Rewari. The alignment is kept parallel
to existing lines, except provision of detours. The Western DFC is entirely on a new
alignment from Rewari to Dadri and also from Sanand to Vadodara. This new line portion
is designed to connect with the existing New Delhi-Mathura line at Asaoti railway station
from Pirthala station of DFC. Moreover, the Western DFC is proposed to join the Eastern
Corridor near Dadri.
Traffic on the Western Corridor mainly comprises ISO containers from JNPT and Mumbai
Port in Maharashtra, and ports of Pipavav, Mundra, and Kandla in Gujarat destined for ICDs
located in northern India, especially at Tughlakabad, Dadri, and Dhandari Kalan. Besides
containers, other commodities moving on the Western DFC are POL, fertilisers, foodgrains,
salt, coal, iron & steel, and cement. Further, owing to its faster growth than other
commodities, the share of container traffic is expected to increase progressively. The
maximum number of trains in the section is projected at 230 (both in UP and DN) in the
Ajmer-Palanpur section in 2024.
The Eastern Corridor, with a route length of 1,861 km, consists of an electrified single-line
segment of 401 km between Ludhiana and Khurja and an electrified double-line segment
of 1,460 km between Khurja – Kanpur–Mughalsarai – Sonnagar- Dankuni.
Traffic on the Eastern Corridor is mainly dominated
by coal for power plants in the northern region of
Uttar Pradesh, Delhi, Haryana, Punjab, and parts of
Rajasthan – from coal fields situated in eastern part
of the country, finished steel, foodgrains, cement,
fertilisers, and limestone to steel plants and general
goods.The number of trains with axle load of 25
tonne works out to a maximum of about 163 in the
UP and DN direction in the Sonnagar-Mughalsarai
section of the Eastern Corridor.
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To attract large commercial investors, monetisation strategy for dedicated freight corridors
would need to be designed along with ground work for monetisation of assets such as
feasibility studies, transaction structuring and assessment of commercial potential. Once
the project is substantially commissioned and there is visibility of revenue model, suitable
models may be adopted. Two potential instruments may be explored for monetisation
of dedicated freight corridor; InVIT and Carry Operate Transfer (COT) Concession. The
target date of commissioning of the project is June 2022 with certain sections slated to
be commissioned by December 2021. Certain sections of WDFC and EDFC have been
commissioned already. Monetisation of the freight corridors in phases may accordingly
commence post commissioning.
Indicative Transaction structure and terms under a COT Concession
Authority Ministry of Railways / DFCCIL
Concessionaire Scope
Grant of a Carry Operate Transfer (COT) concession for
operation and maintenance of Eastern and Western Dedicated
Freight Corridors in separate packages
Concession Period
50-60 years
Revenue
TAC (to be indicated under the Concession Agreement) with pre-specified indexation mechanism
Traffic
Minimum traffic guarantee may be explored (as a % of existing traffic)
Monetisation
consideration
Monetisation value may be paid upfront (or in installment)
Additionally, Revenue sharing mechanism from additional traffic
over minimum traffic guarantee may be specified as per pre-
specified percentage
Authority support
Minimum traffic guarantee
Approval for non-IR freight trains
Reasonable support for approvals/clearances
Selection process
Eligibility: threshold financial capacity (minimum net worth, annual revenue, profitability, etc.)
Open competitive bidding process similar to PPP projects
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Key terms
Asset Bundle OR Right to operate, maintain and earn revenue from such
assets transferred under an InvIT
An SPV may be created sponsored by MoR/DFCCIL
Fixed term of 50-60 years (Assets to be transferred to MoR/DFCCIL at end)
Appointment of Trustee, Investment Manager, Project Manager as per SEBI regulations
Units of InvIT divested under a private placement/public listing (15% for at least 3 years; possibility of higher holding)
Professional Project Manager should undertake the O&M
Minimum Traffic Guarantee by Authority (As percentage of Existing Traffic) may be explored
Table 6 : Comparative assessment of COT Vs InVIT Models for monetising Freight
Corridor
Carry, operate and transfer
(COT)
InvIT
Lead time for
Monetisation post
commissioning
May be monetised as soon
as a particular stretch is
operationalMay need to establish 1 year of
operational history as per SEBI
regulations
Target Investor category
Infrastructure focussed
investors / developers and
funds
Both public listing and private
placement possible; possibility to tap
retail investors in public listing
Valuation driver Premium for controlPremium for liquidity
Future Cashflows for
Authority
Revenue share to capture
windfall gainsDividend against holding of MoR/
DFCCIL
Phased addition of assets
Through grant of
standalone PPP concessions
Possible by way of future offerings
by the InVIT
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Summary
28,608 ckt km 17% Rs 45,200 crore 8%
Asset base
considered for
monetisation over
FY22-25
Asset planned for
monetisation as %
of asset base over
FY22-25
Indicative value
over FY22-25
Share in overall
NMP in value
terms
3.3.1 Potential asset base
India’s economic growth hinges on rapid growth in the energy sector. Energy consumption
in the country has almost doubled since 2000 and is set to grow further. This calls for
huge investments in infrastructure creation and augmentation over the next few years.
As of March 31, 2019, the transmission asset base (in terms of network length) in India
aggregated to a total length of 4,13,407 circuit kilometre (ckm), growing at a healthy
CAGR of 7% since 2015. The shares of the Centre, States and private sector in the overall
length of the transmission lines were 38%, 54%, and 8%, respectively.
The potential asset base considered for NMP under power transmission asset class is the
transmission infrastructure of the nodal central transmission utility, Power Grid Corporation
of India Ltd (PGCIL). As of September 2020
19
, PGCIL owned and operated about 1,68,140
circuit kilometre (ckt km) of transmission lines and 252 sub-stations, with an aggregate
transformation capacity of 419,815 MVA. Of the total transmission network, 93% was
400 KV and above. PGCIL owns inter-state transmission assets comprising of both the
regulated tariff mechanism (RTM) and tariff-based competitive bidding (TBCB) modes.
The bulk of the PGCIL’s assets (to the extent of about 95%) belong to the regulated
assets category, viz. RTM which works on a cost-plus model providing for an assured
return on equity and cost recovery through the tariff fixed by the regulator over 5 year
control periods.
19 https://www.bseindia.com/downloads1/Powergrid%20Infrastructure%20Investment%20Trust_DOD.
pdf
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20
Being a critical link in the power sector value chain, the transmission sector needed
more attention to cater to the growing power demand and the increasing generation
capacity. Investments in the form of budgetary allocations, internal accruals and public
sector undertakings (“PSU”) borrowings were unable to fund this growing need.
Keeping this in mind, the Electricity Act permitted competition in the power sector,
including in the power transmission sector.
The policy framework for TBCB projects was introduced in 2011, which required for
most transmission network development at the Centre to take place through the TBCB
route unless for exceptions created under the policy necessitating RTM as a mode.
Ministry of Power (MoP) constituted the National Committee on Transmission (NCT) to
identify inter-state transmission projects to be developed through competitive bidding
and to oversee the process of competitive bidding. Ministry of Power has also issued
standard bidding documents, such as request for qualification (“RFQ”), request for
proposal (“RFP”), transmission service agreements and share purchase agreements,
and also appointed PFC Consulting Limited and REC Transmission Projects Company
Limited as the bid process coordinators (each, a “BPC”) for carrying out the bidding
process.
Under TBCB mechanism, projects are bid for under a build, own, operate and maintain
(“BOOM”) model as per standard bidding documents notified by the MoP, which
comprises a request for proposal and request for qualification and standard format
of transmission agreement and share purchase agreement. The annual transmission
charge for a 35-year period is discovered through this bidding process.
In the power sector, an estimated total capital expenditure of Rs ~14 lakh crore is envisaged
by both the Centre and states over FY 2020 to 2025. As per NIP, an estimated total capital
expenditure of Rs. ~3 lakh crore would be incurred on electricity transmission projects over
financial years 2020 to 2025. In the transmission segment, PGCIL is undertaking major
projects such as HVDC Bipole Link between western and southern regions, interstate
Green Energy Corridor Transmission Link and construction of substations. Monetisation
of seasoned transmission assets could help finance creation of new infrastructure, by
bringing in much-needed capital.
Factors influencing monetisation of the asset class
Consistent and stable cash flows from assets with long-term visibility and low
counterparty risks: Revenue for electricity transmission is generated from contracted
transmission charges under long-term Transmission Service Agreements (TSAs), with
a low level of operating risk and an availability-based payment mechanism. The recent
PGCIL InvIT was backed by TBCB assets where the transmission charges are fixed for
a period of 35 years, providing stability, consistent cash flows, and long-term visibility.
20 Powergrid InvIT filing document
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The transmission sector in India has witnessed increased participation of both large
domestic and institutional investors, owing to the stability of asset class and availability
based business model.
Stable availability and robust asset profile of transmission assets:
!Inter-state power transmission projects receive transmission charges on the basis
of availability, including in case of outage due to a force majeure event, subject to
requisite approvals and irrespective of the quantum of power transmitted through
the system
!The availability for transmission projects was above 98% in the first nine months
of FY 2021, and the operations of these projects were unaffected as they are
classified as essential services making transmission a resilient asset class
3.3.2 Assets considered for monetisation
The transmission assets considered for monetisation over FY 2022-25 are ~28,608 circuit
(ckt). This includes PGCIL’s transmission assets of 400 KV and above. The total assets for
monetisation constitute around 17% of the total asset base of PGCIL.
aFY 2022 : During FY22, –Transmission assets considered with indicative value of Rs 7,700 crore. Assets to be monetized during FY22 includes the PGCIL’s InvIT issue transaction for which has already been concluded during Q1 of FY22.
aFY 2023, FY 2024 and FY 2025 –Aggregate length of 23,734 ckt kms has been considered for monetisation during this period.
Approach to monetisation
In the case of power transmission assets, the assets considered for monetisation (in ckt kms) and the indicative monetisation value (Rs crore) over FY22-25 are arrived at based on the following steps:
Step 1 – Asset considered for monetisation
!Out of the total transmission asset base of PGCIL, the scale of transmission assets with
capacity of 400 KV and above (1.56 lakh ckt kms) was estimated. The monetisation
potential is available in this category of long-distance transmission assets. This
includes a mix of TBCB and RTM assets. While most TBCB assets of PGCIL are expected
to be bought under the PGCIL InvIT over a period of time, inclusion of additional
assets from RTM category is critical to achieve the required scale in monetisation.
!The transmission assets considered for monetisation over FY 2022-25 depend on factors such as transmission charges, asset availability, and asset mix. The total transmission assets for monetisation are considered at ~28,608 ckt kms.
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!A Market approach has been adopted to determine indicative monetisation
value. Reference valuation (in terms of Rs crore per ckt km) has been taken with
reference to PGCIL’s recently closed InvIT. The indicative monetisation value of
the transmission assets has been considered based on a factor of Rs ~1.58 crore
per ckt km. It may be noted that this is only an indicative value and the actual
realisation and valuation would depend of factors such as asset profile, transaction
structure and market conditions.
3.3.3 Indicative Value of assets and phasing
The total value of assets considered for monetisation is estimated at Rs 45,200 crore
over FY 2022-25, as follows:
7700
7500
1500015000
4873
4747
94949494
4000
6000
8000
10000
12000
14000
16000
FY22FY23FY24FY25
Value (Rs crore) Assets (ckm)
Figure 12: Pipeline phasing – power transmission (Rs crore)
3.3.4 Marquee projects
A. Monetisation of Transmission assets of POWERGRID through InvIT
Key features of the InvIT:
—The PGCIL InvIT has been set up with the objective of monetising its completed and operational transmission projects through alternative sources such as capital markets and by diversifying its investor base
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—Union Cabinet approved monetisation of assets of POWERGRID, through
Infrastructure Investment Trust (InvIT) model in September 2020. This is the
first InvIT by a PSU.
—Pursuant to the Cabinet approval, POWERGRID monetised its 5 high voltage transmission assets held by POWERGRID in form of Special Purpose Vehicles (SPVs) with an aggregate gross block of Rs. ~7,220 crore as on March 31, 2020.
—The InvIT will initially have IPAs, comprising five power transmission projects located across five states of India
—The projects comprise 11 transmission lines, including six 765 kV transmission lines and five 400 kV transmission lines, with a total circuit length of ~3,700 ckt km, and three sub-stations with 6,630 MVA of aggregate transformation capacity and 1,956 km of optical ground wire
—Each of the IPAs has in place a long-term TSA of 35 years from the scheduled COD of the relevant IPA
—Upon expiry of the term of a TSA, the relevant IPA can apply to CERC for renewal if it is not unilaterally extended by CERC
—There is high visibility of potential revenue and cash flows from the InvIT due to availability of additional 18 projects involving an investment of Rs 22,500 crore to be offered as a “project pipeline” to the InvIT
Figure 13: Proposed structure – PGCIL InvIT
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Cost-plus or RTM assets are based on regulated return or cost-plus tariff models, involving
regulated returns on invested equity and are set by the regulator at intervals of 5 year
control periods. Typically, such assets are housed in the parent entity’s balance sheet
and not under separate SPVs. Monetisation for such assets hence may require a scheme
of arrangement / demerger process which may pose associated transaction overheads
such as continuation of tax holiday on assets, capital gains tax, stamp duty etc., due to
asset transfer.
The government vide the Finance Act, 2021 has amended various sections to make the
reorganisation of a PSU into separate companies a tax-neutral transaction. With the
Finance Act, 2021, the government has effected amendments to the Section 47 of the
Income Tax Act which allows for transfer of capital assets by a PSU to another notified
public sector company, central government or state government to not be regarded as
transfer. Such transfer shall be under a plan approved by the central government.
Strategy for monetising RTM assets
In order to effect value unlocking, carving out the revenue rights on these
assets to a separate SPV by way of a special demerger may be explored
as the investors value completed projects differently than the portfolio of
assets in the balance sheet which also includes under construction risks and
corporate risks. Tax efficiencies can be brought in by structuring of transaction
as revenue rights as against transfer of assets into an SPV.
Demerged SPV may be assigned rights to receive transmission charges as against asset. Since ownership does not change hands, stamp duty impact can be minimized.
Regulator’s consent and lenders’ approval would need to be obtained prior to transaction process
80 (I) a: Impact can be minimized by choosing assets which have minimal negative impact on valuation or 80 (i) a benefit has been exhausted substantially
A monetisation model similar to the toll-operate-transfer (TOT) model may also be
explored for successful monetisation of RTM transmission assets. The TOT model has
been conceptualised by MORTH for undertaking the monetisation of operational toll road
projects. This model focuses on income yielding assets with established cash flows, and
there is no transfer of ownership of assets from the Authority to the Concessionaire. The
concessionaire retains the revenues and is responsible for undertaking O&M obligations
only, and this model does not involve the concessionaire assuming any construction risk.
Besides, capacity augmentation, if required, is undertaken by the Concessioning authority
at its own cost. Certain distinctions however exist between statutory bodies such as
NHAI (which has in recent past adopted the TOT model) and PSUs such as PGCIL which
functions as a corporate. The key aspects which need to be considered for adopting a
TOT based model for RTM transmission assets are:
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Regulatory
Can enter into concession
agreements
Does not have regulatory powers/authority
to grant transmission license/concessions
for transmission business
Regulator approval may be required for an
investor to obtain a license from CERC/
SERC without owning the project assets
Income tax on
upfront payment
Income of NHAI exempt
(Sec.10(23C)(iv) of IT Act)
Payable at corporate rates
Toll/tariff
determination
Approves toll rates based
on formula linked to WPI
Tariff is decided based on Tariff norms;
Challenges in ARR filing due to non-
ownership of project assets by a
concessionaire may need to be addressed
at the time of obtaining regulator’s consent
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Summary
~ 2.86 lakh km of
Bharatnet Fiber
14,917 Nos. of BSNL
& MTNL towers
Bharatnet Fibre – 57%
Towers – 21%
Rs 35,100 crore 6%
Assets for
monetisation in FY
2022 to 2025
Asset monetised
as % of asset
base (FY 2022-
2025)
Indicative
monetisation
value in FY
2022-2025
Share in overall
NMP in value
terms
3.4.1 Potential asset base
The potential asset base considered are telecom tower assets under the central sector
entities, namely Bharat Sanchar Nigam Ltd (BSNL), Mahanagar Telephone Nigam Ltd
(MTNL) and Bharatnet optical fibre assets under the central sector entities, namely
Bharat Broadband Network Limited (BBNL) and Bharat Sanchar Nigam Ltd (BSNL). BSNL
currently has 68,000 towers of which ~13,567 towers have co-locations from third party
telecom operators. With more than 70% of BSNL towers fiberized, the tower infrastructure
is amenable for 4G and 5G deployments. The tower assets with co-location based revenue
stream have been considered as potential asset base for monetisation. Similar to BSNL,
MTNL also has about ~1,350 towers with co-location/ rentals which may be suitably
bundled along with BSNL tower assets for the purpose of monetisation.
About ~2,86,255 km of existing fibre assets of BBNL and BSNL, laid under the Bharatnet
project spanning over 16 states has been considered for monetisation through PPP mode.
Bharatnet is a flagship project of Government of India (GoI) funded by Universal Service
Obligation Fund (USOF), Department of Telecommunications (DoT), with an aim to
provide high speed broadband connectivity to all Gram Panchayats (GP) and extension
to their villages across India. The network infrastructure under the Bharatnet project is a
national asset and accessible on a non-discriminatory basis to all eligible service providers
to enable them to provide services in rural areas.
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Potential for deepening fibre penetration – The level of fixed broadband (FBB)
penetration in India is estimated at 6.5%, which is considerably lower than that of the
Asian peers (China 84%, Sri Lanka 26.2%, and Vietnam 49.5%). One of the primary
challenges to this scale-up is the operational constraints in the deployment of fibre in
the intra-city and last mile network segments. The Bharatnet initiative is aimed to plug
this gap in FBB. Nevertheless, the considerable untapped market and the potential
for greater penetration of fibre network is expected to generate investor interest in
these assets.
Government policy push – The government’s policy push to meet the supply-side gap
is one of the critical drivers for growth over the medium term.
aThe National Digital Communications Policy (NDCP) 2018 serves as an anchor for India’s transition to a digitally-empowered economy. Under NDCP 2018, the government provides incentives to tower companies to facilitate the establishment of mobile tower infrastructure by: (i) extending incentives and exemptions for the construction of telecommunication towers; (ii) according accelerated right of way (ROW) permission for telecommunication towers in government premises; and (iii) promoting and incentivising deployment of solar and green energy for telecommunication towers.
aThe Bharatnet project is the backbone of ‘Digital India’ and aims to reduce the digital divide between urban and rural India. The project involves laying of optical fibre cable (OFC) between block and gram panchayats. This infrastructure would be made available to service providers on a non-discriminatory basis who, in turn, would utilise it to provide affordable high-speed broadband to rural citizens and institutions. As of March 19, 2021, about 5.13 lakh km of OFC laying has been completed covering 1.57 lakh gram panchayats.
Established processes for passive infrastructure sharing (tower assets) – India has
seen active participation between telecom providers on passive infrastructure sharing. Currently, the country has seen robust frameworks for passive infrastructure sharing between telecom operators called Master Service Agreements (MSA). These agreements clearly spell out the pricing, tenure, roles and responsibilities of the parties, and other binding terms. The establishment of such formal frameworks will bring in the necessary transparency to the monetisation process and help investors identify the risks upfront.
3.4.2 Assets considered for monetisation
The following core infrastructure assets have been considered for monetisation during FY 2022 to 2025: aBharatnet Fibre assets: ~2.86 lakh route-km of Bharatnet fibre assets proposed to be bid out through PPP model by DoT through nine packages comprising 16
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and the actual outlay of capex will happen over 2 years from the date of award.
aBSNL & MTNL Tower assets: ~14,900 towers (~13,567 towers of BSNL and ~1,350 towers of MTNL ) with co-locations from third party telecom operators have been considered for monetisation during FY23. The feasibility study and transaction preparation work for the same is presently being undertaken.
Approach to monetisation
The scale of asset monetisation is guided by the urban-rural distribution of the assets. In case of tower assets, 14,900 towers have been considered.
Tower Assets: The indicative monetisation value for tower assets is arrived at based
on the EV approach factoring in available data on revenue earned from co-location
rentals, pass through charges, O&M and assumptions based on tower tenancy, ramp up
over a 30 year period. NPV of EBITDA has been taken as the indicative monetisation
value from tower asset monetisation. The same is indicative only and the actual value
realisation is a function of multiple factors intrinsic utilisation, tariff, market conditions,
MSA terms and transaction structure. Further, there are two reference transactions
in the market for monetisation of tower assets in the private sector which have seen
valuation per tower asset of about Rs ~38 lakh.
Bharatnet Fibre Assets: The indicative monetisation value for Bharatnet fibre assets is
considered based on Capex approach. The estimated capex for 9 Bharatnet packages
envisaged to be tendered out in FY 2022 has been considered at Rs 26,300 crore.
It may be noted that these packages are being structured on PPP mode with grant
/ premium as the bidding parameter. The actual private investment towards these
packages could be lower than the estimated capex and a portion of capex may be
met out of grant. The capex phasing towards the assets has been assumed as 60%
during year 1 and 40% during year 2.
3.4.3 Indicative Value of assets and phasing
The total value of assets considered for monetisation is estimated at Rs 35,100 crore for
FY 2022 to 2025, with the following asset phasing:
aBharatnet Fibre assets: Indicative monetisation value of Rs. 26,300 crores has been considered as over FY23 and FY 24. It may be noted that the actual private investment towards these packages could be lower than the estimated capex and a portion of capex may be met out of grant. The capex phasing towards the identified packages has been assumed as 60% during year 1 (assumed as FY23) and 40% during year 2 (assumed as FY 24).
aBSNL & MTNL Tower assets : Indicative valuation of Rs. 8,800 crore has been considered as monetisation value to be accrued split equally over FY22 and FY 23.
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Sl no. Asset type FY22 FY23 FY24 FY25 Total
1 Bharatnet Fibre— 15,780 10,520 — 26,300
2 BSNL & MTNL Tower assets — 4,400 4,400 — 8,800
TOTAL— 20,180 14,920 — 35,100
15,780
10,520
4,4004400
FY23FY24
Bharatnet Fibre BSNL & MTNL Tower assets
Figure 14: Pipeline phasing – Telecom assets (Rs crore)
3.4.4 Monetisation potential of telecom towers of BSNL
BSNL currently has about 68,000 towers, of which about 13,000 provide co-location
facilities to other telecom operators. BSNL is looking to increase the tenancy of these
towers to boost revenue. In the past few years, BSNL’s revenue through lease rentals has
been increasing with rise in the number of tower co-locations. More than 70% of the BSNL
sites are connected through fibre compared with the industry average of less than 25%. Of
the total 5.8 lakh towers in India, only 1.5 lakh are connected through fibre which provides
a huge competitive advantage to marketability of tower infrastructure of BSNL. With the
existence of a large number of BSNL towers at own exchange sites, there is ample space
to house the equipment. Space has been a key issue in enhancing co-location through
the number of tenants or augmenting technology. Further, BSNL’s tenancy ratio on towers
is 1.2 compared with the average of 1.9 for private players. In view of all of above, there
is significant scope for monetisation of tower rental receivables through a PPP based
concession which will also help in generating upfront equity liked funds for BSNL for
deployment towards capex.
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towers
This model entails grant of a long-term PPP concession for the utilisation of operational
pipeline capacity through a PPP concession akin to the TOT model successfully
employed by NHAI in the roads sector. The right to rent, operate and maintain the
tower rentals will be granted to a concessionaire for a pre-defined concession period
as against an upfront consideration, which could be the bidding parameter.
MSA
Upfront Consideration
& [Revenue Share]
Usageoftowers
20-25yrROT
concession&BSNL
Captive usage
agreement
Concessionaire
Authority /
BSNL
Tenants / 3
rd
party Users
Co-location
rentals /
Charges
TowerInfrastructureO&M
3.4.5 Monetisation potential of Bharatnet Fiber Network
The project is proposed to be implemented through DBFOT model under PPP mode. The implementation shall be through an SPV wherein the Concessionaire, selected through a competitive bidding process, would enter into a Concession Agreement with the Authority to Develop, Build, Finance, Operate and Maintain the Project Facilities over the pre-agreed Concession Period and Transfer the same to the Authority or its designated agency at the end of the Concession Period (DBFOT).
aCreation and Upgradation: To build and upgrade network infrastructure across GP and Block locations and extend the network to connect villages under the scope of work
aOperation and Maintenance: To operate and maintain the existing and the newly deployed network infrastructure
aUtilization: To ensure and manage utilization of existing and deployed capacity across the network infrastructure in a non-discriminatory manner.
Table 8:
Project packages envisaged under Bharatnet
PackagesLicensed Service Area (LSA)
Package 1 Kerala, Karnataka
Package 2 Uttar Pradesh (East)
Package 3 Uttar Pradesh (West)
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Package 5 Punjab, Haryana, Himachal Pradesh
Package 6 West Bengal
Package 7 Arunachal Pradesh, Mizoram, Tripura, Manipur, Nagaland, Meghalaya
Package 8 Madhya Pradesh
Package 9 Assam
The Concession Period of 25 years (including construction period) from the appointed
date (fulfilment of conditions precedent) is envisaged. Upon the expiry of the Concession
Period, project facilities would be handed over to the Authority at no cost. Bid parameter
shall be Grant or Premium.
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Summary
6.0 GW (~3.5 GW
Hydro, ~2.5 GW RE)
6%Rs 39,832 crore
7%
Assets for
monetisation over
FY22-25 (GW)
Assets planned for
monetisation as %
of asset base over
FY22-25
Indicative
monetisation value
over FY22-25
Share in overall
NMP in value terms
3.5.1 Potential asset base
The power sector accounts for the largest share of investments in infrastructure. The
energy use is projected to grow rapidly to fuel economic development, urbanisation
and improved electricity access. India’s growing per capita consumption of energy, calls
for huge investments in the sector for installation of new capacities and upgradation of
existing ones. Electricity Act, 2003 has been a game changing comprehensive legislation
in the sector pushing the sector onto a trajectory of commercial growth.
The potential asset base considered is the existing power generation capacity of central
sector entities under the Ministry of Power. The total installed capacity of power generation
sector in India was 382 GW as on April 30, 2021
21
. The private sector share in installed
generation capacity is ~47%. Out of the total installed capacity of 382 GW, about 97.5 GW
is in the Central sector and under central PSUs as on April 30,2021. Bulk of this capacity
is coal and gas based. Based on estimates, the share of central sector agencies according
to the nature of fuel is as follows: coal – 74%; gas – 9%; hydro – 15%; and renewables –
3%. Various central sector entities such as National Hydroelectric Power Corporation Ltd.
(NHPC), National Thermal Power Corporation Ltd (NTPC), Satluj Jal Vidyut Nigam Ltd
(SJVNL) and NLC India Ltd (Neyveli Lignite Corporation Ltd) under Ministry of Coal hold
this asset base.
Renewable Energy (RE) segment has made significant strides in recent years reporting
substantial increase in capacity on the back of strong government support, private
sector investment, favourable policies and incentives, as well as falling cost of generation,
particularly for the wind and solar power. There is also strong investor appetite for stable
RE assets as evidenced by recent transactions.
21 https://powermin.gov.in/en/content/power-sector-glance-all-india
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Focused government initiatives – The government’s recent initiatives to address the
weakest link in the power sector, viz. distribution, is expected to boost investor interest
in power generation projects. Key steps include the following:
!Mitigation of counterparty risks associated with discoms – Introduction of Solar
Energy Corporation of India (SECI) as a nodal agency and as an intermediary between the private sector (power gencos) and discoms for RE projects presents a credible counterparty to the private sector vis-à-vis discoms
!Liquidity support packages – The government had approved liquidity support
packages involving one-time loans of about Rs 1,30,000 crore from Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to discoms, to clear their overdue payments to power generating companies. To date, total disbursements under this scheme have aggregated to about Rs 75,000 crore. Timely implementation of this liquidity support scheme is crucial in the near term amid the adverse impact of the Covid-19 event and related lockdown
!Other long-term measures are being introduced for sustained improvement in discoms’ finances – (i) Recent directive from the power ministry to all regulatory bodies to issue tariff orders of all distribution licensees with an objective to ensure timely revision of cost-reflective tariffs
22
; (ii) installation of smart meters and moving
the consumers to prepaid basis to reduce AT&C losses; (iii) introduction of a Rs 3 lakh crore reforms-linked distribution reforms scheme involving disbursement of funds to discoms linked to them achieving set milestones
!The government has announced key measures to address investor concerns related to sanctity of contracts not being honoured – the Electricity Contract Enforcement Authority would adjudicate on performance of contracts
ESG-compliant clean energy projects – Investments in clean energy projects help
institutional investors comply with their goals related to environmental, social, and governance (ESG) investments. Hence, renewable energy projects are expected to garner significant investor interest over the medium term.
Strong economic case for investing in renewable energy – Increasing investor interest in
the renewable generation sector can be attributed to the government placing greater
emphasis on promoting renewable energy investments, through measures such as
providing fiscal incentives, and enabling more favourable policies and regulatory
frameworks. Further, investors are looking at renewable energy as part of their ESG
considerations.
3.5.2 Assets considered for monetisation
The assets considered for monetisation over FY 2022-25 aggregate to 6.0 GW. Out of
this, about ~3.5 GW is from hydel assets and about ~2.5 GW is RE assets (solar and wind).
22 In compliance with the provisions of Electricity Act 2003 and Tariff Policy 2016
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generation capacity under central PSUs. Key entities whose assets have been considered
are NHPC, NTPC & SJVNL who own bulk of the hydel assets and NTPC (under Ministry
of Power) and NLC (under Ministry of Coal) that own renewable assets.
Table 9 :
Phasing of pipeline of power generation Assets (figures in MW)
CategoryFY 22 FY 23 FY24 FY 25 Total
Hydro assets–existing373 870 870 1,243 3,355
RE assets – existing— 245 612 1,106 1,962
Hydro assets – to be operational— — 59 59 117
RE assets – to be operational— — 235 300 532
Total 373 1,115 1,775 2,707 5,970
Approach to monetisation
In the case of power generation assets, the assets considered for monetisation (GW)
and the indicative monetisation value (Rs crore) over FY 2022-25 are arrived at based
on the following steps:
Step 1 – Asset considered for monetisation
!Monetisation of coal and gas assets has not been considered during the NMP
period. The interest of global investors in these assets is limited by the strict ESG
guidelines under which they operate and the uncertain long-term potential of the
assets. Further, asset-level risks such as the dependence on high-cost LNG imports
also limit private-sector participation in gas-based power plants, unless backed by
(i) assured supply of cheaper gas, or (ii) policy-level push to incentivise discoms
to buy gas-based power, or (iii) bundling with Renewable Energy (RE) power to
firm up supply from RE sources
!Operational hydel generation assets are more amenable to monetisation given the offered flexibility in operations and renewable nature rendering them eligible for meeting Renewable Purchase Obligation (RPO) for states. Further, the hydro assets operating under a regulated tariff regime provide a degree of predictability to investors on the return on their invested capital. Around 3.5 GW of hydro assets (which is 27% of the existing hydro generation asset capacity of central PSUs of about 12,864 MW) have been considered for monetisation over FY 2022-25 as these could be seasoned assets and have a proven track record of operations and stabilisation in receivables (days) due from off-takers.
!The existing solar capacity of central sector agencies is estimated at ~2.5 GW, with an additional 1 GW capacity to be added over the next two years. Around 2.5 GW of solar capacity (i.e. ~100% of the existing solar capacity by central PSUs namely, NTPC and NLC, of about 2,447 MW) has been considered for monetisation over
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!FY 2022-25 assuming seasoning for such assets. Given that solar generation is
largely private-sector driven and given that government should rather take the
‘stewardship’ role of nurturing the sector and giving policy direction rather than
operating these assets, a larger chunk of RE assets have been considered for
monetisation.
Step 2 – Arriving at the indicative monetisation value
!The book value approach has been adopted to determine an indicative value of the above-mentioned assets varying based on the vintage value of the asset. (i) the average realisation value for hydel assets has been tentatively considered as Rs 7.5 crore per MW; (ii) the average realisation value for solar assets has been tentatively considered as Rs 5.5 crore per MW
!The product of asset considered for monetisation (in MW) and above-mentioned book value of assets (Rs crore per MW) are used to compute the annual indicative monetisation value (Rs crore) for assets in each sub-sector, such as solar, hydel, and wind power plants
3.5.3 Indicative value of assets and phasing
The indicative value of assets considered for monetisation is considered at Rs 39,832 crore over FY 2022-25. The summary of annual phasing is as follows:
Asset typeFY 22 FY 23 FY 24 FY 25 Total
Monetisation Value (Rs crore) 2770 7808 11704 17550 39,832
Assets considered (MW) 373 1,115 1,775 2,707 5,970
2770
7808
11704
17550
2707
1775
1115
373
FY 22FY 23FY 24FY 25
Figure 15: Monetisation pipeline phasing – power generation (Rs crore)
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Summary
8,154 km25% Rs 24,462 crore 4%
Assets for
monetisation in
FY22-25 (km)
Asset planned for
monetisation as
a % of asset base
(FY22-25)
Indicative
monetisation
value in FY22-25
(Rs crore)
Share in overall
NMP in value
terms (%)
3.6.1 Potential asset base
The total potential asset base considered are the natural gas pipeline assets managed
by the central sector entities. Natural Gas Pipeline Infrastructure connects various gas
sources to different gas markets to meet the existing/ future natural gas demand of various
Power, Fertilizer, CGD and other industries in the Country. The gas pipeline infrastructure
has facilitated widespread industrialization and has brought significant socio-economic
changes to different parts of the country.
India is the third-largest global energy consumer, after China and the US. India’s primary
energy requirement is met through a mix of oil and coal, with natural gas forming a 6% share
of the energy mix. As part of its environmental agenda, the government aims to increase
the share of gas to 15% by 2030. Towards this, expansion of the existing transmission
pipeline network and improvement in capacity utilisation of available pipelines become
essential. The operational network of natural gas pipelines in India spans about ~16,900
km with a design capacity of ~400 mmscmd.
1
An additional 18,363 km of natural gas
pipeline network is approved/under construction stage. Hence, the natural gas grid of
India is estimated to expand to ~35,263 km in the next three to five years.
The public sector utilities dominate the pipeline development and operation space. The
Government recognizes the need to augment the natural gas transmission infrastructure
in the country and has been driving the development of natural gas pipeline connecting
all regions of the country which is shaping-up into Natural Gas Grid (NGG).
Over the years, GAIL as a major gas pipeline operator has contributed to the growth
and development of natural gas pipeline infrastructure and natural gas market. It has an
existing gas pipeline network of 13,389 km with a capacity of 204 MMSCMD.
The table below summarises the total asset base of operational Natural Gas Pipelines of
GAIL.
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S. No.Network/ Region#Length (KM)*
1
Hazira-Vijaipur-Jagdishpur & Gas Rehabilitation and Expansion
Project & Dahej-Vijaipur Pipeline Network (HVJ-GREP-DVPL-I)
5,030
2 Dahej-Vijaipur Pipeline (II) & Vijaipur-Dadri Pipeline Network. 1,290
3 Tripura Network60
4 Cauvery Basin242
5 Chhainsa-Jhajjar-Hissar Pipeline Network (CJPL)304
6 Dahej-Uran-Panvel-Dabhol Pipeline Network935
7 Dadri-Bawana-Nangal Pipeline Network868
8 Dabhol-Bengaluru Pipeline Network (DBPL)1,148
9 Gujarat Regional Pipeline Network663
10
Jagdishpur Haldia & Barauni Guwahati Pipeline Network
(JHBDPL)
1,098
11 KG Basin Pipeline Network889
12
Kochi-Koottanad-Bengaluru-Mangaluru Pipeline Network
(KKBMPL)
504
13 Mumbai Regional Pipeline Network125
14 Dedicated Networks233
Total Length13,389
GAIL has been operating at about ~49-52% capacity utilisation levels in recent years. GAIL
markets about 25% of its pipeline capacity as common carrier capacity. It has a 100+
customer base of shippers that use its pipeline network on an open-access basis. While
the trunk/cross-country pipelines of GAIL do report higher capacity utilisation levels, the
overall utilisation is still sub-optimal.
Factors influencing monetisation of the asset class
Established customer relationships: The natural gas pipeline assets are usually backed by long-term customer relationships, ensuring cash flow stability. The market leader GAIL has well established and long-standing relationships with customers across industry segments, including power, fertiliser, city gas distribution companies, etc.
Regulated pricing regime: The natural gas pipelines operate under a regulated pricing
regime. The oil regulator Petroleum and Natural Gas Regulatory Board (PNGRB), by
tariff regulations, determines the per unit tariff for natural gas pipelines, allowing
operators a reasonable post-tax return on capital employed, and remains fixed for its
entire economic life. The ‘per unit tariff’ is determined for the natural gas pipeline over
its economic life and is levelised across certain periods.
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growing natural gas markets globally, led by supportive government policies–aggressive
investment plans towards production, import and distribution infrastructure, and
measures such as new licences for city gas distribution, raising pipeline tariffs for long-
haul pipes, and banning more polluting fuels like fuel oil and pet coke. In November
2020, PNGRB simplified the country’s gas pipeline tariff structure to make fuel more
affordable for distant users and attract investment for building gas infrastructure.
Further, to usher gas-based economy, a national gas exchange plan is under discussion
to bring market-driven pricing in the Indian energy market.
Structures to enable consistent and stable cash flows: The pipeline business’s
performance depends on the volume of gas transported. The gas transmission revenues
are substantially derived from gas transportation agreements with customers having
high dependence on select large customers. Structures, where the central sector
agencies provide some backstop arrangements to reduce the counterparty risks, may
provide some comfort to investors. This will enable near-term revenue visibility with a
minimum guaranteed offtake. Possible arrangements include:
SPV may enter into a pipeline usage agreement (PUA) with the sponsor, whereby the
latter could contract a certain capacity of the pipeline for a long term, thus providing
assured offtake for a threshold level of throughput
The arrangement could ensure steady cash flows to the SPV in case the actual revenue
is lower, either on account of lower gas volume or tariff considerations
3.6.2 Assets considered for monetisation
The assets considered for monetisation during FY 2022-2025 are select gas pipelines with
an aggregate length of ~8,154 km, of which 7,928 km are from the existing operational
pipeline assets and the rest from pipelines that are expected to become operational during
the NMP period.
During FY22, two pipelines with a total length of 2,229 km namely, Dabhol-Bengaluru
pipeline (length of 1,414 km & capacity of 16 mmscmd) and Dahej-Uran-Panvel-Dabhol
pipeline (length of 815 km & capacity of 20 mmscmd) have been identified for monetisation.
Over the balance NMP period (FY23-25), a total of 5,925 km of pipeline assets have been
considered for monetisation (~1554 km in FY 23, ~2073 km in FY 24 and ~2298 km in FY
25). The specific pipelines / bundles would need to be identified corresponding to the
years pipeline.
The total assets considered for monetisation (~8154 km) over FY23-25 form around 23%
of the aggregate pipeline asset base (total gas pipeline network of ~35,263 km envisaged
as part of the Gas Grid).
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In case of natural gas pipeline assets, the assets considered for monetisation (in
kilometres of pipeline) and the indicative monetisation value (Rs crore) over FY 2022-
2025 are based on the following:
Step 1 – Asset considered for monetisation.
!Existing assets are shortlisted based on (i) the existing capacity utilisation of the
piped network, and (ii) potential demand, especially based on connected regions.
Through this methodology, pipeline assets of 7,928 km for monetisation have been
identified during FY 2022-2025
!Of the new natural pipelines to be constructed, about 200 km of pipeline assets
23
have been estimated to be monetised over the NMP period. For any new project, at least two years of operational track record has been assumed (to ensure the minimum level of capacity utilisation)
Step 2 – Arriving at the indicative monetisation value
The Enterprise Value (EV) approach (in Rs crore per km) has been considered for
estimating indicative value based on available data on pipeline tariff order and
assumptions w.r.t. utilisation, peak utilisation, ramp up, tariff and throughput. However,
the valuation differs from one pipeline to another. The average value for the purpose
of ascertaining monetisation value has been accordingly considered at Rs 3.0 crore per
km. The same is indicative only and the actual value realisation is a function of multiple
factors intrinsic pipeline utilisation, tariff, assured capacity offtake and transaction
structure terms.
A reference transaction available for pipeline valuation is the East West pipeline
monetisation (Kakinada to Bharuch) undertaken in the private sector in 2019. The
reference valuation of this asset was about Rs. 10 cr / km. The said transaction however
had components of captive utilization and assured offtake / revenue arrangements.
3.6.3 Indicative value of assets and phasing
The total value of assets considered for monetisation is estimated at Rs 24,462 crore
during
FY 2022-2025
23 This is because the existing assets already include a bulk of the ongoing and under construction projects,
which will be operational by FY 2022 or FY 2023
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3.6.4 Indicative structures for monetisation
Carry-operate-transfer (COT) concession
This model entails grant for a long-term PPP concession to utilise operational pipeline
capacity through a PPP concession akin to the TOT model, successfully employed by
NHAI in the roads sector. Entities can explore this model without creating the pipeline
subsidiary or actual transfer of pipeline assets from the balance sheet into a separate SPV.
The rights to utilise and market the capacity of the pipeline on a common carrier principle
will need to be valued to determine the initial estimated concession value in this option.
This structure will require regulatory consultation and approval from the regulator PNGRB
to determine regulatory feasibility of grant of concession by GAIL.
Creation of a Pipeline InvIT
In the recent past, InvITs have emerged as a preferred infrastructure financing vehicle
to attract investments, especially by foreign institutional investors. In the natural gas
transmission sector, there is a precedence of InvIT-based structure, when India Infrastructure
Trust, an infrastructure investment trust sponsored by Brookfield Asset Management
(BAM), took over 100% ownership of 1,375 km long Kakinada to Bharuch natural gas
pipeline from a private sponsor for a period of 20 years against an upfront consideration.
Under an InvIT structure, operational pipeline assets or revenue rights on the assets can be
parked directly or through an SPV under an InvIT. InvIT (the trust) can be owned by the
asset owner CPSE as the ‘Sponsor’ with investors holding a partial stake. An InvIT structure
involves high standards of strong corporate governance through the appointment of an
investment manager, project manager and trustee.
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ASSETS
Summary
3,930 km23% ~Rs 22,503 crore 4%
Assets for
monetisation over
FY22 to FY25
(km) (Product +
LPG pipeline)
Asset monetised
as % of asset
base (FY22-25)
(Product + LPG
pipeline)
Value in FY22-25
(Rs crore)
Share in overall
NMP in value
terms (%)
Asset Classes:
!LPG Pipelines
!Petroleum product pipelines
!Hydrogen generation plants
!ESG assets (Effluent treatment plants, Sulphur recovery
units, Flare gas recovery systems)
3.7.1 Potential asset base
The total potential asset base considered are the operational product and LPG pipelines
operated by the central sector entities, namely Indian Oil Corporation Ltd (IOCL), Hindustan
Petroleum Corporation Ltd (HPCL) and Gas Authority of India Ltd (GAIL). The operational
product and LPG pipelines in India are ~17,432 km, including (i) 43 product pipelines
extending to 14,063 km, and (ii) 6 LPG pipelines extending to 3,369 km.
In this segment, IOCL is the key central sector entity, as it has about 52% share in product
pipelines (by length) and operates a network of more than 14,600 km long crude oil,
petroleum product and gas pipelines with a throughput capacity of 94.42 mmtpa of oil
and 21.69 mmscmd of gas. Other entities that also operate product pipelines are BPCL,
HPCL and GAIL. The bulk of the pipelines have utilisation levels exceeding 100%, ensuring
a strong revenue visibility. Around 45% of the total product pipeline length (~6,292 km)
reported utilisation levels above 100%; another 21% of the pipeline network with utilisation
levels of between 80-100%.
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High utilisation levels and counterparty risk profile ensure stable cash flows: The bulk
of the crude pipelines network has a capacity utilisation exceeding 100%. Almost 45%
of the total pipeline network reports capacity utilisation of more than 100%. Another
21% of the total network reported a capacity utilisation between 80% and 100%. The
utilisation levels are similar in case of LPG pipelines with 42% of the network (in km)
reporting a capacity of 100% and above.
Regulated pricing regime: Similar to the natural gas pipelines, PNGRB grants the
authorisation for the development of petroleum and petroleum product pipelines. The
product pipelines operate under a regulated pricing regime. The tariff of Petroleum
and Petroleum Product Pipelines (other than those awarded through bidding process)
is determined under PNGRB (determination of Petroleum and Petroleum Products
Pipeline Transportation Tariff) Regulations, 2010. According to these regulations, the
transportation tariff for such pipelines is determined by benchmarking the same against
an alternate transportation mode (i.e. rail) at the level of 75% on a full train load basis
for equivalent rail distance, except for LPG where 100% parity with rail tariff is allowed.
3.7.2 Assets considered for monetisation
The assets considered for monetisation during FY 2022-2025 are petroleum product /
LPG pipelines of ~3,930 km. Out of this, ~3,196 km are product pipeline assets and ~733
km are LPG pipeline assets.
HPCL’s, Mangalore – Hassan pipeline (LPG pipeline) has been identified for monetisation
during FY 23. Other assets for monetisation from HPCL for subsequent years in NMP will
be identified.
The total pipeline assets identified for monetisation under the product pipeline (3,196
km) and LPG pipeline (734 km) assets category as a percentage of total respective asset
base (product pipelines of 14,063 km and LPG pipelines of 3,369 km) are 23% and 22%,
respectively.
Besides the pipeline assets above, other asset classes including 2 Hydrogen Generation
plants at the Gujarat Refinery of IOCL have been identified for monetisation over FY22
and FY23 with an estimated indicative monetisation value of Rs. 1,200 crore. Other asset
classes from IOCL include ESG assets (effluent treatment plants, Sulphur recovery units,
Flare gas recovery systems) in a phased manner over the NMP period with an estimated
indicative monetisation value of Rs. 8,000 – 10,000 crores.
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S.No. Asset type FY22 FY23 FY24 FY25 Total
1
Petroleum product
pipelines (km)
755 629 906 906 3,196
2 LPG pipelines (km) - 141 296 296 733
3
Hydrogen generation
plants (nos.)
1 1 - - 2
4 ESG assets*
Not
available
Not
available
Not
available
Not
available
Not
available
*Details of ESG assets to be monetised are available with the respective line ministries
Approach to monetisation
In case of product and LPG pipeline assets, the assets considered for monetisation (in
kilometres of pipeline) and the indicative monetisation value (Rs crore) over FY 2022-
2025 are arrived through following steps:
Step 1 – Asset considered for monetisation
!The assets for monetisation have been shortlisted based on the existing capacity
utilisation of the piped network. The pipelines with the capacity utilisation of 100%
and above have been considered. However, the public sector agency may bundle
some of the high utilisation assets with moderate and low utilisation assets to
ensure better risk transfer
!Out of the overall asset base of product pipeline assets of 14,063 km, ~2,643 km of pipeline assets have been considered for monetisation over FY 2022-2025. New product pipeline assets (including under construction pipelines and projects currently under preparation stage) totalling ~554 km is envisaged to be monetised over the same period
!Similarly, out of the overall asset base of LPG pipeline assets of 3,369 km, ~734 km of assets have been considered for monetisation over FY 2022-2025
!Based on this process, a total of 3,930 km of petroleum product and LPG pipeline assets have been identified for monetisation during FY 2022-2025
Step 2 – Arriving at the indicative monetisation value
!Hydrogen Units & ESG assets: Indicative monetisation value for these assets has
been taken based on information on monetisation value received from the ministry. Based on the range provided by the ministry of Rs. 8,000 – 10,000 crores, Rs. 8,000 crore has been considered divided equally over the NMP period for ESG assets which will be monetised as core assets. For Hydrogen generation Plants, Rs. 1,200 crores divided equally over FY22 & 23, has been taken as the indicative monetisation value based on information provided by the ministry.
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!Product pipeline assets: EV approach has been adopted to determine the indicative
monetisation value for pipeline assets. The NPV of the operating profit across
pipeline assets has been taken as the basis for arriving at indicative monetisation
value. The operating profit has been estimated across two steps: (i) Estimation of
tariff based on PNGRB approved rates in NPV terms across fixed (Rs 0.1 per MT)
+ variable component (Rs 10 per MT per km) for recent pipeline transactions (ii)
Operating margin factor of 65% assumed on the above tariff to estimate the NPV
of operating profit. The above figures are indicative in nature and the actual value
realisation is a function of multiple factors including intrinsic pipeline utilisation,
tariff, assured offtake and transaction structure.
!LPG pipeline assets: EV approach has been adopted to determine the indicative monetisation value for LPG pipeline assets. As in the case of product pipeline assets, the NPV of the operating profit across LPG pipeline assets has been taken as the basis for arriving at indicative monetisation value. The NPV of tariff of Rs 12 per MT per km (in line with tariffs for select pipeline transactions) and an operating margin of 65% has been assumed for estimating the indicative value. The same is indicative only and the actual value realisation is a function of multiple factors including intrinsic pipeline utilisation, tariff, assured offtake and transaction structure.
3.7.3 Value of assets and phasing
The total value of assets considered for monetisation is estimated at Rs 22,503 crore for
FY 2022-2025.
Table 12: Phasing of monetisation value – Petroleum product / LPG pipeline & other
assets (Rs cr)
Sl no. Asset type FY22 FY23 FY24 FY25 Total
1 Petroleum product pipelines 2,697 1,873 4,164 4,164 12,898
2 LPG pipelines 0 40 183 183 405
3 Hydrogen generation plants 600 600 - - 1,200
4 ESG assets2,000 2,000 2,000 2,000 8,000
TOTAL5,297 4,513 6,347 6,347 22,503
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Summary
~210 lakh metric
tonne (LMT)
— 175 LMT – FCI
— 35 LMT–CWC
39% Rs 28,900 crore 5%
Assets planned
for monetisation
in FY 2022 to
2025
Asset monetised
as % of asset
base (FY 2022 to
2025)
Indicative
Monetisation
value in FY 2022-
2025
Share in overall
NMP in value
terms
3.8.1 Potential asset base
The potential asset base considered for monetisation under warehousing assets consists of
storage depots, warehouses under the central sector agencies, Food Corporation of India
(FCI) and Central Warehousing Corporation (CWC), with both entities operating under
the aegis of Department of Food & Public Distribution. Existing storage capacity with FCI
and other agencies for central pool stocks as on April 1, 2020 is 755 Lakh Metric Tonne
(LMT). Out of this, 412 LMT is available with FCI and 343 LMT with the state agencies.
FCI’s storage capacity of 412 LMT is in turn 30% owned and 70% hired (through CWC,
SWCs, and the private sector). CWC operates 422 warehouses with a total operational
storage capacity of 109.72 LMT
24
. This includes custom bonded warehouses, container
freight stations, inland clearance depots, air cargo complexes, etc. The potential assets
for monetisation are owned warehouses of FCI and CWC.
The aggregate storage capacity with the key central sector agencies – FCI and CWC –
is estimated to be ~521 LMT (~412 LMT with FCI & 109 LMT with CWC). Out of the FCI
available asset base, FCI owned storage infrastructure i.e. about 123 LMT is amenable
for monetisation as the facilities have a strong potential for augmentation and capacity
expansion. CWC’s entire capacity of ~110 LMT is amenable for monetisation as it has a
revenue stream (in form of storage charges from FCI & other users) and also a strong
commercial potential for augmentation, capacity expansion and O&M.
The public distribution system (PDS) is an integral part of India’s food security system,
operated by the nodal Ministry of Consumer Affairs, Food, and Public Distribution. The
central government, through FCI, has assumed the responsibility for procurement, storage,
transportation and bulk allocation of food grains to the state governments, for eventual
distribution to beneficiaries through the PDS. FCI manages the functions of procurement
24 https://dfpd.gov.in/cwc.htm
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transportation of food grains and other notified commodities. These stocks eventually
are distributed to the beneficiary consumers at the PDS shops through various welfare
schemes of the government.
Hence, owing to the policy mandate of MSP operations, there is a continual need to
augment the storage capacity. In this context, adequate storage infrastructure is of
paramount importance owing to the requirement to hold huge inventories of food grains
over a significant period of time. Adequate scientific storage is, hence, a pre-requisite to
fulfil the policy objectives assigned to FCI, for which it has a country-wide network of
strategically located warehouses and storage depots.
India needs more bulk handling facilities than it currently has. Many of FCI’s old conventional
storage warehouses and depots (covered-and-plinth [CAP] type storage) have existed
for several years and are located in proximity to production hubs. There is significant
potential in improving the infrastructure and reducing the cost of storage and handling
losses by tapping private sector efficiencies in operations and management. The continual
need to augment the storage infrastructure necessitates leveraging the existing storage
warehouses and depots to tap private long-term institutional capital by employing
structured investment vehicles and brownfield PPP models so as to ease the burden on
budgetary support requirement.
Factors influencing monetisation of the asset class
Growth in e-commerce space: The expanding e-commerce space offers a new set of
opportunities for the warehousing and logistics players. FCI and CWC have a sizeable number of underutilised warehouses near urban centres. Considering the potential growth in demand for warehouses due to e-commerce growth, monetisation of such assets is expected to bring in significant value from the private sector.
Established track record of agencies in private sector engagement: FCI and CWC have
an established track record in dealing with private sector players over the years. Hence,
the institutional understanding as well as the regulatory framework for engagement is
successfully in place in these firms. One of the landmark private sector engagement
initiatives is the Private Entrepreneurs Guarantee (PEG) Scheme for augmenting the
storage capacity of FCI in PPP mode. Under this scheme, storage capacity is created
by private parties under an assured capacity offtake arrangement by FCI. A total of
153 LMT of storage capacity has been initiated under the scheme as of February 2021.
Value maximisation: Most of the warehouses that were planned and constructed
between 1980 and 1990 are located in prime locations and in proximity to city centres
that have now become part of the urban landscape. Thus, these land parcels can be
leveraged for augmenting the quality as well as capacity of storage infrastructure. The
private sector can be mandated to undertake the task of redevelopment/ refurbishment
of assets while ensuring minimal operational disruption and incremental cost for the
authority.
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the normal procurement season for central pool food grains in the country is ~650
lakh MT. Against this, the total storage capacity available with FCI, CWC, and the state
agencies (both owned and hired capacity, including CAP) is 875.09 lakh MT at a pan-
India level. Thus, it is imperative to optimally rationalise the existing capacity, while
ensuring high operational efficiency by leveraging the strength of specialised firms.
Approach to monetisation
In case of warehouses, the assets considered for monetisation have been taken based on preliminary pipeline information provided by the Department of Food & Public distribution (DoFPD). The pipeline presently consists of storage infrastructure assets with need of significant augmentation in infrastructure and rehabilitation. Accordingly, the key project interventions have been identified by the line ministry. Hence the monetisation value has been considered in form of private sector investment towards augmentation of these assets.
The indicative monetisation value has been arrived at based on the ‘Capex approach’.
The capex for all the projects has been based on high level estimates provided by the
DoFPD as part of the pipeline. The cost assumptions are as follows: (i) capex per LMT
for silos has been estimated at Rs 100 crore per LMT, (ii) cost per cold storage facility
has been considered at Rs 40 crore per location.
Indicative Monetisation Value considered at this stage is only a preliminary estimate
based on high level asset information and thumb rule estimates.
Besides, storage infrastructure, DoFPD has also identified land parcels and vacant land
for monetisation however the same has not been considered under NMP as they will
be monetised as non-core assets.
3.8.2 Assets considered for monetisation
The assets considered for monetisation during FY 2022 to 2025 have an aggregate
capacity of ~210 LMT.
The key asset classes under asset monetisation include (i) development of 175 LMT of wheat
silos by FCI, (ii) development of 35 LMT silos at 45 locations by CWC, (iii) development of
cold storage facilities in 190 locations by CWC and (iv) development of 1.16 LMT storage
capacity by Central Railside Warehouse Company Ltd (CRWCL).
The DoFPD is also in process of developing pipeline of other brownfield assets and
finalisation of monetisation mechanisms other than development of Silos and cold storages.
The assets of FCI & CWC considered for monetisation aggregating to ~210 LMT are about
39% of the existing storage capacity available with FCi & CWC i.e. 512 LMT (~412 LMT with
FCI & 109 LMT with CWC).
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The total value of assets considered for monetisation is estimated at Rs 28,900 crore for
FY 2022 to 2025, and phased as follows:
Table 13: Phasing of monetisation value – Warehousing assets (Rs cr)
S.No. Asset type FY22 FY23 FY24 FY25 Total
1 Storage Infrastructure–FCI 3,500 5,250 5,250 3,500 17,500
2 Storage Infrastructure–CWC 2,280 3,420 3,420 2,280 11,400
TOTAL5,780 8,670 8,670 5,780 28,900
2,280
3,4203,420
5,2505,250
3,500
2,280
3,500
Figure 18: Monetisation value – Warehousing (Rs crore)
3.8.4 Indicative structures
In recent years, alternative means of monetising operating projects have evolved in India,
wherein significant interest has been showcased by potential private investors. Several
options have been successfully implemented depending on the specific requirement of
shareholders. However, the success of such monetisation would depend on the location
selected, keeping in mind the interest/ appetite of investors, regulatory requirements,
shareholder requirements, type of contracts and governance/ control sought by investors
in operating projects, etc. In view of these factors, the following options can be considered:
1. Monetisation via the infrastructure investment trust (InvIT) route
2. Suitable PPP models akin to TOT (toll-operate-transfer) model adopted by NHAI for highways suitably customised for brownfield warehousing assets and OMD based model for assets where augmentation and capacity expansion is envisaged.
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Multiple structures to monetisation have been evaluated, including InvIT, OMD model.
A typical structure of transaction is as follows:
InvIT-based monetisation
InvIT-based monetisation of SPV (north/ west/ east zone-wise warehousing asset
clusters may be formed) with long-term contracted rights to earn storage charges
from FCI and other third party users. This structure may entail creating an SPV with
requisite revenue rights. Independent investment manager and specialist professional
project managers are key to this InvIT based monetisation.
Tenure: 25-30 years with transfer back to the Authority / Sponsor at the end
Other features:
!Assured storage capacity for FCI’s captive use and storage needs
!Professional management and key performance indicators (KPIs; handling losses,
etc)
!FCI and / or CWC could be co-sponsors of the InvIT
!Since investors look at scale, region-wise clusters may be formed. InvIT-based monetisation of SPV (north/ west/ east zone-wise) with long-term contracted rights to earn storage charges from FCI
Indicative transaction structure
Operate, Manage and Develop (OMD) based PPP model
!OMD for brownfield warehousing assets with rights to add additional capacity/ augment existing infrastructure and at vacant land
!Tenure: 25-30 years with transfer at the end of the concession
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!Revenue model: Storage and handling charges paid by FCI (assured capacity)
and third parties (surplus capacity)
!Other features: Strict KPIs (handling losses, etc) and mandatory investments may
be specified
!Benefits to Investors:
!Strategic locations: surplus production areas or in the consumption areas
!Presence of trunk infrastructure
!Reduced gestational time
!Professional management and investment in mechanisation
Indicative transaction structure for an OMDA-based model for warehouse
monetisation
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Coal Mining Assets–Summary
160 projectsRs 28,747 crore5%
Number of identified
projects for monetisation
over FY22-25
Indicative monetisation
value over FY22-25
period
Share in overall NMP in
value terms
Mineral Mining Assets–Summary
761 blocks over FY22-25
Fresh mineral blocks
G4 level Composite
License, G2 / G3 level
Mining Lease
Non-working mines
ML applications under
Section I0A(2B)
Auctioned by :
Respective State
Governments
Value : Not assessed
3.9.1 Potential asset base
Coal Mining Assets
The total inventory of coal resources in India (up to a depth of 1,200 metre) was estimated
25
at about 344 billion tonne as per GSI as on April 1, 2020. As per CIL (Coal India Limited)
demand for coal was estimated at 1,000 MT for FY 2020, whereas the indigenous availability
was estimated at 811 MT. The gap of 189 MT was projected to be met through imports.
Factors influencing monetisation of the asset class
Strong policy push by the government to open up the sector – The push towards
reducing dependence on coal imports was one of the major policy initiatives under the pioneer ‘Atmanirbhar Bharat’ initiative by the government. The government’s recent initiatives towards opening up commercial mining to the private sector in India remains a landmark reform for asset monetisation. The Mineral Laws (Amendment)
25 Prepared by the Geological Survey of India on the basis of resources estimated by CMPDI, MECL, GSI,
and SCCL
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26
, is expected to bring in higher inventory of assets towards auction, and
increase participation of the private sector by removal of end-user restriction on coal
assets for the private sector. It also amends the methodology for auction of coal and
lignite mines/blocks for sale of coal/lignite on a revenue-sharing basis. The sector is
also open to global investors as 100% FDI (Foreign Direct Investment) is allowed for
the coal and mining sector.
Streamlining the approval process – The government’s recent launch of the Single
Window Clearance portal for coal mining is expected to streamline the approval
process and reduce the lead time to starting commercial exploration of coal assets.
It is a unified platform that facilitates grant of clearances and approvals required for
starting a coal mine in India.
Success of the first auction – Pursuant to the opening of the commercial coal mining
sector, the first auction was held in June 2020. Out of the 38 mines put on auction,
financial bids were received for 19 mines
27
. These assets saw a fair bit of competition and
high premium (despite uncertainties due to the Covid-19 event and related lockdown).
The highest premium was 66.75%, whereas the average premium was 29%. States are
also expected to raise revenue of Rs 6,656 crore annually through the auction.
Mineral Mining Assets
Auction of mineral blocks is undertaken by the respective State Governments. Once a
mineral block is auctioned, various clearances such as forest clearance, environmental
clearance and other statutory clearances are obtained prior to commencement of
production. Upon commencement of production, the royalty and auction premium on the
mineral produced and dispatched typically constitutes the income from the mine. However,
royalty and auction premium are paid to the Government as and when the mineral is
removed from the leased area. Hence, the auction of mineral blocks may not yield upfront
lump sum proceeds. The proceeds / revenues accrue to the State governments and is
spread throughout the mining lease period.
Ministry of Mines in 2015 amended the MMDR Act, 1957 which introduced auction regime
to bring transparency in allocation of mineral blocks. Besides, the Ministry has initiated
a number of reforms pertaining to auction of mining blocks as a result of which a large
number of mineral blocks will be available for auction during the coming years.
26 Reforms to the Coal Mines (Special Provisions) Act, 2015, and the Mines and Minerals (Development and
Regulation) Act,1957
27 Out of these successfully auctioned 19 mines, 11 are opencast, five are underground mines, and the
remaining three are a mix of underground and opencast mines. These mines are spread over five states –
Madhya Pradesh, Chhattisgarh, Odisha, Jharkhand, and Maharashtra – and have consolidated peak rated
capacity of 51 MT per annum.
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Ministry of Coal
The Ministry has identified more than 160 projects for private-sector participation towards
improving efficiency as well as scaling up production. The projects are expected to be
implemented over the next 2-3 years and include the following:
aMine developer and operator (MDO) model – 17 projects with total capacity of ~178 MTY (15 projects of CIL and 2 projects of NLCIL
aEstablishment of 3 washeries (BOO – Build, Own, Operate model)
a1 Coal gasification plant (BOO – Build, Own, Operate model)
a35 identified first-mile connectivity projects for building coal silos/ mechanised loading
aOperationalisation of 4 discontinued / abandoned projects
aCommercial auction of mines
28
Ministry of Mines
About 761 mineral blocks are expected to be put on auction over FY22-FY25 period. Year wise mineral blocks asset phasing is summarised in table below:
Table 14:
Phasing of Mineral Blocks
S.No.Category of Mineral blocks FY21—22 FY22—23 FY23—24 FY24—25
1
Fresh mineral blocks ready
to be auctioned
49 — — —
2
50 blocks of G4 level for
Composite License or CL
and 12 blocks of G2 / G3
level for Mining Lease or ML
62 (50 CL+12
ML)
62 (50
CL+12 ML)
— —
3
Non-working expired mines
(~50% of total 104 i.e. 52)
18 (Working
expired mines
which have
not been
auctioned)
26 26 —
4 Mines expiring till 2024 9 34 53 29
5
ML applications under
Section I0A(2B) (Total of
393 Nos.)
— 131 131 131
Total138 253 210 160
28 CMDPI (subsidiary of CIL) plans to explore/discover approximately five mines every quarter to the pool
of coal blocks available for auction. Accordingly, around 80 coal blocks are expected to be added in the
next 4 years. Valuation of the commercial auction has not been considered as it depends on the success
of the same.
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amount that may accrue to auctioning authorities typically depends upon the quality and
quantity of the resources, and the market prices during the lease period. Reserve positions
of many mines are not known at present and are yet to be ascertained by the State
Governments. Therefore, the information regarding estimated proceeds from auction of
such mineral blocks can be discovered only after the auction process is completed and
mining has commenced.
Approach to monetisation
The approach to monetisation has been anchored on the project assets identified by the line ministries for monetisation. The value has been phased out for the period FY 2022 to FY 2025 based on the year in which the project is planned to be awarded. The actual capex may be phased out across multiple years.
3.9.3 Indicative value of assets and phasing
The total indicative value of assets considered for monetisation is estimated at Rs 28,747
crore over FY 2022-25. About Rs. 22,625 crore of the assets are expected to be tendered out during FY 2022. However, the actual capex will be phased out across the next three years. The Monetisation value in the pipeline has been accordingly considered based on actual capex phasing assumed over 4-5 years, as set out in the figure below.
10,568
Figure 19: Phasing of Monetisation pipeline – coal mining (Rs crore)
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Summary
2518% Rs 20,782 crore 4%
Number of
AAI airports
considered for
monetisation
Assets planned
for monetisation
as % of existing
AAI airports
Indicative
Monetisation
Value over
FY22-25
Share in overall
NMP in value
terms (%)
3.10.1 Potential Asset Base
India has seen massive growth in the airport sector with investments from both the
government and private sector. The country has become the third-largest domestic civil
aviation market in the world and has immense potential to grow further. This calls for
higher investment to build new airports and augment the existing airport infrastructure
to support future growth.
The total Potential Asset Base considered includes airports under Airports Authority of
India (AAI) and its joint venture (JVs)
29
under the aegis of the Ministry of Civil Aviation. AAI
is a statutory body constituted by an Act of Parliament with the responsibility of creating,
upgrading, maintaining, and managing civil aviation infrastructure both on the ground and
air space in the country. AAI manages 137 airports
30
, including 24 international airports, 10
customs airports, and 103 domestic airports. In FY 2020, AAI airports handled ~160 million
passengers (international: 22 million and domestic: 138 million), which accounted for ~35%
of the total passenger traffic handled by airports in India. Over the years, AAI has made
significant strides in tapping private sector efficiencies in development, operations and
management of airports which has resulted in about 65% of passenger traffic throughput
being managed by private airports in India. PPPs in major airports such as Delhi, Mumbai
have contributed significantly in pushing the aviation sector ahead.
29 Assets held via other subsidiaries or JVs of AAI or entities directly under the purview of MoCA (as
applicable) have not been included. However these assets are proposed to be included as part of NMP
in due course as necessary.
30 https://www.aai.aero/en/corporate/organization#:~:text=During%20the%20year%202019%2D20,Interna -
tional%20452.46%20%26%20Domestic%20456.85%5D
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Airport monetisation through brownfield PPP models has been boosted in India by
the success stories of asset monetisation of four airports – Mumbai, Delhi, Hyderabad,
and Bengaluru. This is primarily in terms of improved user experience and increase in
value for all stakeholders. During FY 2020-21, 6 AAI airports were leased out to private
sector through PPP based model, namely, Ahmedabad, Lucknow, Mangalore, Guwahati,
Jaipur and Thiruvananthapuram and the assets are in process of getting handed over
to the operator. Further, this is backed by the presence of a strong regulatory and
contractual framework which has helped retain investor confidence.
Policy enablers – Government initiatives such as the introduction of the Airports
Economic Regulatory Authority (AERA) of India (Amendment) Bill, 2021, in the Lok
Sabha proposing amendment of the definition of ‘major airport’.
!Currently, 25 AAI airports have been considered for asset monetisation. Given their nascent stage of actual traffic and expected ramp-up period to achieve a minimum scale of operations, a strategy of bundling such airports with smaller airports is being explored.
!In order to enable bundling of airports as a bidding strategy, a bill for Amendment in AERA Act has been introduced during March 2021 in Lok Sabha with an intent to empower AERA to determine tariff for a ‘group of airports’.
!Government vision for the sector – The NIP has provided for capex of Rs
~90,000 crore over FY 2020-25 to scale up passenger handling capacity. For this, a number of projects for construction of new terminals, runways, taxiways, and parking facilities are being undertaken. Several airports are being developed under the Regional Connectivity Scheme-Ude Desh Ka Aam Nagrik (RCS-UDAN),
and terminal buildings are being expanded to improve amenities and passenger handling capacity. Development of the airport sector through PPP is one of the key areas of focus identified in the government’s NIP 2020.
3.10.2 Assets considered for monetisation
Twenty-five major AAI airports are considered for monetisation over FY 2022-25. The larger objective is to focus on monetisation of these 25 airports, while bundling of smaller airports may be explored based on market testing of transactions and investor feedback.
During FY 22, AAI has identified 6 airports in Tier 2/Tier 3 cities namely, Amritsar, Varanasi,
Bhubaneswar, Indore, Raipur and Trichy for the purpose of monetisation through brownfield
PPP models. To ensure commensurate development of non-profitable airports along with
the profitable airports with the help of private sector investment and participation, pairing
/clubbing of smaller airports with each of the six bigger airports and leasing out as a
package is being explored.
Further, divestment of AAI’s residual stake in four airport JVs has also been considered
under the monetisation pipeline. This includes the private sector operated airports in
Mumbai (26% stake), Delhi (26% stake), Hyderabad (13% stake), and Bangalore (13% stake).
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management of AAI.
Approach to monetisation:
Step 1 – Asset considered for monetisation: It includes a combination of large and
small airports, in line with the current monetisation plans of the Ministry of Civil
Aviation.
Airports with a threshold level of traffic: Scale is an important factor in determining
investor interest. Hence, airports having annual traffic above the threshold of ~0.4
million passengers (in FY 2019 and 2020) have been considered.
Airports with a sizeable ongoing/proposed capex plan as per the NIP have been
considered for monetisation. Such projects can be financed via the PPP mode.
Step 2 – Arriving at the indicative monetisation value
The ‘Capex approach’ has been considered for arriving at the Indicative Monetisation
Value. In the absence of availability of airport-wise capex, a normative assumption of
Rs 130 crore per million incremental passenger capacity (for moderate sized airports)
and Rs. 200 crore (for larger airports i.e. FY 19 annual passenger throughput of more
than 1 million) per million incremental passenger capacity has been considered. This
is in line with the capex per million passengers for select projects considered under
the NIP.
A ‘Market approach’ has been adopted for determining indicative valuation of AAI
stake in private JV airports. As per secondary sources and estimates based on recent
transactions involving sale of stake in Indian airports, the total indicative value of AAI’s
residual stake in the above-mentioned four JVs has been tentatively taken at ~Rs
10,000 crore
31
for inclusion in the pipeline. The valuation of AAI stake in JV airports is
only an indicative high level value and the actual price discovery will be made from
the market transaction. The actual realisation will depend on multiple factors such as
transaction timing, market conditions, investor appetite and transaction terms.
3.10.3 Indicative Monetisation Value of assets and phasing
The total value of assets considered for monetisation is estimated at Rs 20,782 crore for
FY 2022-25.
Out of this Rs. 10,000 crore of monetisation value has been tentatively considered on
account of divestment of AAI stake in private JV airports. The same has been phased out
equally over FY22 and FY23. It may be noted that the actual realisation from AAI stake
sale will depend on multiple factors such as transaction timing, market conditions, investor
appetite and transaction terms.
31 The values are indicative in nature. While the initial estimates pegged the value at ~Rs 16,000 crore,
a lower estimate has been taken consider13ing the adverse impact of Covid-19 and related travel
restrictions
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of 25 airports identified for monetisation. Based on assumptions explained above, the total
estimated capex towards the 25 airports is estimated to be Rs.13,945 crore. However, the
actual investment towards the augmentation will be phased out over 2-3 year period and
in certain cases in phases. Since the same cannot be reasonably determined at this point
in time, for the purpose of NMP, the actual investment has been assumed to be phased
out over 3 year period from the target year of award. Hence, during the NMP period
of FY22-25, monetisation value of Rs. 10,782 crore has been considered on account of
estimated capex towards identified airports. The phasing considered for capex towards
identified airports is as per table below:
Table 15:
Assumed phasing considered for capex of identified airports
ParameterFY 2022 FY 2023 FY 2024 FY 2025
Phasing of 6 airports with target award in FY22 720 1,440 1,440 —
Phasing of 8 airports with target award in FY23 — 859 1,718 1,718
Phasing of 6 airports with target award in FY24 — — 839 1,677
Phasing of 5 airports with target award in FY25 — — — 371
Total720 2,299 3,996 3,767
It may be noted that under PPP based mechanisms, based on final transaction structure
for the projects, there could be additional revenue streams to AAI as an authority such as
passenger fees, upfront premium or any other charges to authority. The same have not
been factored in the indicative monetisation value.
Figure 20: Phasing of Monetisation pipeline – airports (Rs crore)
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S.No. City / Airport
Estimated
Capex (Rs cr)
S.No. City / Airport
Estimated
Capex (Rs cr)
6 Airports in FY22 3,6006 Airports in FY24 4,193
1 Bhubaneswar 9001 Chennai2800
2 Varanasi5002 Vijayawada600
3 Amritsar5003 Tirupati260
4 Trichy7004 Vadodara245
5 Indore4005 Bhopal159
6 Raipur6006 Hubli130
8 Airports in FY 23 4,2955 Airports in FY25 1,857
1 Calicut5621 Imphal253
2 Coimbatore5002 Agartala418
3 Nagpur4003 Udaipur491
4 Patna10004 Dehradun566
5 Madurai6945 Rajamundhry 130
6 Surat301
7 Ranchi708
8 Jodhpur130
25 Airports in Tier 2 & 3 cities spread pan India
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airports
Sl. No. Airport
Existing Annual
capacity (million
pax)
Traffic–
FY19 (million
pax)
Traffic–
FY20 (million
pax)
1 Chennai21.0022.5422.27
2 Bhubaneswar4.504.163.67
3 Calicut2.193.363.23
4 Coimbatore2.503.002.84
5 Varanasi2.502.793.01
6 Amritsar2.502.522.46
7 Trichy1.501.581.61
8 Imphal1.731.281.29
9 Vijaywada2.001.181.13
10 Tirupati1.000.830.83
11 Nagpur3.002.803.06
12 Patna5.004.064.53
13 Madurai1.281.521.42
14 Surat1.101.241.52
15 Indore3.003.162.92
16 Ranchi1.462.252.49
17 Raipur2.002.032.12
18 Agartala0.911.441.51
19 Udaipur0.551.391.25
20 Dehradun0.461.241.33
21 Vadodara1.281.161.10
22 Bhopal1.280.811.33
23 Jodhpur0.500.510.57
24 Hubli1.000.460.48
25
Rajahmundry1.000.440.41
Source: AAI
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Summary
31 projects in 9 major
ports
Rs. 12,828 crore2%
Number of development
projects planned in
major ports
Total Indicative
Investment over FY
2022-2025 (Rs crore)
Share in overall NMP in
value terms (%)
3.11.1 Potential Asset Base
India comprises a significant size maritime sector with 12 Major and 200+ Non-Major Ports
situated along its 7500 km long coastline and a vast network of navigable waterways. The
country’s maritime sector plays a crucial role in its overall trade and growth, with 95% of
the country’s trade volume and 65% of the trade value being undertaken through maritime
transport. Port development in India is guided by the flagship Sagarmala programme
32
and the recently unveiled Maritime India Vision 2030.
Maritime India Vision 2030
Maritime India Vision 2030 (MIV 2030) is a ten-year blueprint for the maritime sector that was released by the Prime Minister of India at the Maritime India Summit in February 2021. It aims to boost waterways, give a fillip to the shipbuilding industry and encourage cruise tourism in India. With the objective of propelling India to the forefront of the global maritime sector, the Ministry of Ports, Shipping and Waterways formulated the MIV 2030, a blueprint to ensure the coordinated and accelerated growth of India’s maritime sector over the next decade. MIV 2030 has been formulated in consultation with over 350 public and private sector stakeholders, comprising ports, shipyards, inland waterways, trade bodies and associations, national and international industry and legal experts.
32 Sagarmala is the flagship programme of the Ministry of Shipping to promote port-led development in
the country
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A total investment cost of over INR 33,400 Cr. has been envisaged for this capacity
expansion. Out of this, approximately 95% capacity expansion is likely to be planned
under Public Private Partnership (PPP)/ Captive mode by Major Ports
33
.
With 12 major ports, the aggregate asset capacity under the purview of Central line
ministry (MoPSW,) directly held by the Port Trusts
34
is around 1,494 MMTPA, as on March
31, 2020
35
. Of this, the total capacity under PPP mode/ captive use is estimated at around
664 MMTPA (~44% of total capacity), while the capacity under the purview of respective
Port Trusts is around 830 MMTPA (~56% of total capacity).
3.11.2 Assets considered for monetisation
The assets considered for monetisation from FY 2022 to 2025 are spread across 9 of the 12
major ports. Towards this, 31 projects have been identified for private sector participation
for improved operational efficiency and capacity utilisation of existing port assets.
Approach to monetisation
In the case of port assets, monetisation potential has been arrived at based on key development and maintenance projects envisaged over FY 2022-25 for private sector investment through PPP mode. Key projects include additional berths, mechanisation, development of oil jetty, container jetties, O&M of container terminal, O&M of International cruise terminal and development of marina. The proposed capex (in Rs crore), as estimated by the Ministry of Ports, Shipping & Waterways, has been taken as the basis for estimation of indicative monetisation value. Further, the actual capex outlay has been assumed to take place over a three year period from the date of expected award and in certain cases in two phases.
The primary model for monetisation of ports and shipping assets is by way of grant
of PPP concessions.
3.11.3 Indicative Monetisation Value of assets and phasing
The total estimated capex towards 31 identified projects considered for monetisation is
estimated at Rs 14,483 crore for FY 2022-25. Out of 31 projects, 13 projects with expected
capex of Rs. 6,924 crore are envisaged to be tendered out in FY 2022, followed by another
10 projects with expected capex of Rs. 4,680 crore are envisaged to be tendered out in
FY 2023.
However, the actual investment towards the development of assets will be phased out
over a defined time period as laid out under the contract. Since the same cannot be
33 MIV 2030 document
34 Additional assets held via subsidiaries or JVs have not been included.
35 IPA Yearbook 2019-20
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has been assumed to be phased out over 3 year period from the target year of award.
Hence, during the NMP period of FY22-25, monetisation value of Rs. 12,828 crore has
been considered on account of estimated capex towards identified the 31 projects.
Table 18:
Pipeline of Ports projects over FY22-25
S.No.Port
Total No of
Projects
FY22 FY23 FY24 FY25
1 Paradip Port4 22
2 Deendayal Port (Kandla)4 2 2
3 JNPT(Mumbai)3 1 2
4 Mormugao Port3 1 2
5 Mumbai Port 2
6
Shyama Prasad Mukerji Port
Kolkatta (Khidderpore)
4 11 2
7
Shyama Prasad Mukerji Port
Kolkatta (Haldia)
3 1 1 1
8 Visakhapatnam Port4 1 2 1
9
V. O. Chidambaranar Port
(formerly Tuticorin)
3 2 1
10 New Mangalore Port11
Total31 13 10 3 5
FY 2022 – A total of 13 projects adding up to Rs 6,924 crore are envisaged to be awarded
during FY 2022. The monetisation pipeline phasing represents the year in which a certain
project is envisaged to be tendered out and the actual capex investment is likely to happen
in phases during the initial years in the envisaged concession period.
Table 19:
Port Projects to be tendered out during FY2021-22
S. No.Project NamePort
Estimated
Investment
(Rs. Cr.)
Target
award
1, 2
Deepening and optmisation of
Inner Harbour facilities including
development of Western dock Captive
berth (1 nos) to handle cape size vessel
Paradip Port 3,005z Jan,2022
3
O&M of Mumbai International cruise
terminal
‘Capacity-10 L pax pa
Mumbai Port 495 Sep,2021
4
Mechanization of Berth No. 2 (erstwhile
No.3 (PPP))
SMP, HDC 332 Mar,2022
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Estimated
Investment
(Rs. Cr.)
Target
award
5
Conversion of 2 Berths as container
Jetty at Kidderpore dock (PPP)
SMP, KDS
96
(Phase-1), 86
(Phase-2)
Jan ,2022
6
O&M of Proposed Mormugao Port
International Cruise Terminal (PPP)
Mormugaon
102 (EPC),
22 (PPP)
Dec, 2021
7 Oil Jetty No. 9Kandla 123 March,2022
8
Berth No.14 Mechanized Fertilizer
Handling Facility
Kandla 300 Dec,2021
9 Container TerminalJNPT 863 Sep, 2021
10 Berth No. 9VOCPT 435 Sep,2021
11 NCB-III BerthVOCPT 420 Dec, 2021
12 WQ-7&8
Visakhapatnam 288 Jan, 2022
13
Development of Marina
(PPP),Capacity:300 yacht
Mumbai 357 Oct, 2021
Total (FY22)6,942
FY 2023 to 2025 – A total of 18 projects adding up to Rs 7,168 crore are expected
to be awarded during the period. The phasing represents the year in which a
certain project is envisaged to be tendered out; the actual capex investment is
likely to happen in phases during the envisaged concession period.
Table 20:
Port Projects to be tendered out during FY2023-25
SNProject NamePort
Estimated
Investment
(Rs. Cr.)
Target
award
1Berths 1,2,3&4VOCPT 2,144 FY22-23
2 Development of Additional Liquid
Cargo Jetty
JNPT181 FY22-23
3 Redevelopment of Berth No. 9 and 3
barge berths
Mormugaon 700 FY22-23
4 O&M of Berth Nos. 10& 11 on PPP Mormugaon 200 FY22-23
5 Mechanization of EQ-7 berth Visakhapatnam 200 FY22-23
6 Mechanization of WQ-6 berth Visakhapatnam 250 FY22-23
7 Mechanisation of Berth No. 10 SMP (HDC) 350 FY22-23
8 Oil Jetty No. 10DPT (Kandla) 123 July ,2022
9 Oil Jetty No. 11DPT (Kandla) 362 Nov, 2022
10Operationalization of Coastal Berth JNPT170 July,2022
Sub-total (FY23)4,680
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Estimated
Investment
(Rs. Cr.)
Target
award
1Mechanization of EQ-6 berth Visakhapatnam 250 FY23-24
2 Strengthening and Mechanization of
Berth 7,8 NSD on DBFOT basis
SMP (KDS) 340 FY23-24
3 Mechanisation of Berth No. 5SMP (HDC) 325 FY23-24
Sub-total (FY24)915
1Mechanization of CQ1 & CQ2 Berths Paradip 1103 Sep, 2024
2 Berth 9,10&11New Mangalore 200 FY24-25
3 Mechanization of Berths 4 & 5 NSD
on DBFOT Basis
SMP (KDS) 270 FY24-25
4 Construction and mechanisation
of container berths at NSD outer
Terminal
SMP(KDS) 298 FY24-25
5 Mechanization of SQB BerthParadip 75 FY24-25
Sub-total (FY25)1,946
Figure 21: Monetisation pipeline phasing – Ports (Rs crore)
Factors influencing monetisation of asset class
The ports sector has witnessed many policy initiatives over the last decade to revive
investor interest and facilitate asset recycling. Key actions include:
!100% FDI permitted under the automatic route
!Central government has already taken multiple initiatives like Major Port Authorities Act 2021 which enables Major ports to move from a service model to a landlord model and bring in more private sector participation to drive operational efficiency.
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!Major Port Authorities Act 2021 enables Major ports to transform effectively for
the future. Key areas to be implemented on the ground as per the Major Port
Authorities Act 2021 are
36
:
Image source : Maritime India Vision document, 2030
!An evolved framework and MCA for PPP projects in major ports was approved by the Cabinet in 2018 to make investments in the ports sector more attractive. The amendments approved by the Cabinet include dispute resolution mechanism (SAROD
37
–Ports), relaxed exit clause for developers.
i. Constitution of the SAROD–Ports as a dispute resolution mechanism similar to the SAROD in highways sector
ii. Concessionaire to pay royalty on “per MT of cargo / TEU handled” basis; this would be inflation-indexed annually, with port operator to pay royalty on actual and not notional income. Ministry has recently constituted an empowered committee to review the MCA and recommend amendments (if any).
iii. Providing an exit route to developers for complete stake sale post two years of project completion date
These initiatives will help usher in increased private sector interest and also result in improved operational efficiencies with reduction in turnaround time at Major Ports.
36 maritime-india-vision-2030.pdf (maritimeindiasummit.in)
37 SAROD – Society for Affordable Redressal of Disputes is a dispute resolution mechanism similar to
SAAROD in the highways sector
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Summary
2 National stadiums and
2 regional centres
Rs 11,450 crore2%
Assets planned for
monetisation in FY22-25
Indicative monetisation
value in FY22-25 (Rs crore)
Share in overall NMP in
value terms (%)
3.12.1 Potential asset base
The total potential asset base considered are the assets under the Sports Authority of
India (SAI) under the aegis of the Ministry of Youth Affairs & Sports. The assets are largely
managed under the Sports Authority of India (SAI) and categorised into three broad
categories – stadiums (managed by the Stadia division), regional centres and academic
institutions. The focus of monetisation is on the stadiums and regional centres.
The Stadia division is responsible for formulating policy guidelines for the utilisation of
five SAI stadiums in Delhi, having different facilities created with the twin objective of
broad-basing sports and to achieve excellence in sports. The five stadiums include: (i)
Jawaharlal Nehru Stadium Complex, (ii) Indira Gandhi Sports Complex, (iii) Dr. Shyama
Prasad Mukherjee Swimming Pool Complex, (iv) Major Dhyan Chand National Stadium
and (v) Dr. Karni Singh Shooting Range.
The SAI regional centres/sub-centres and academic institutions are the implementing
agencies for its sports promotional schemes and academic programmes across the
country. The 10 regional centre assets include (i) SAI Netaji Subhas Eastern Regional
Centre (NSEC), Kolkata; (ii) SAI Netaji Subhas Southern Centre (NSSC), Bengaluru; (iii)
SAI Netaji Subhas Western Centre (NSWC), Gandhinagar; (iv) SAI Udhav Das Mehta (Bhai
ji) Central Centre, Bhopal; (v) SAI Ch. Devi Lal Northern Regional Centre, Sonipat; (vi)
SAI Regional Centre, Chandigarh; (vii) SAI Netaji Subhas North-East Regional Centre,
Imphal; (vii) SAI Regional-Centre, Lucknow; (ix) SAI Regional-Centre, Guwahati; and (x)
SAI Regional Centre, Mumbai.
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World class sports infrastructure: Sports stadiums not only serve as playing venues but
also are centres of training and excellence in sports. Large infrastructure facilities host
several international events, and maintaining these venues after the events are over
or in between events is a challenge globally. Stadia fall to disrepair and disuse due to
lack of foresight across the life cycle of a stadium. Over the last few years, the sports
industry has witnessed a transformation with growing sophistication in infrastructure
needs, increased visibility of competitive sports and emergence of sports as a business
proposition. Recently, India has made proactive efforts to host numerous mega sporting
events. Majority of sports stadia in India require better utilisation, revitalisation of sports
usage and upgradation of infrastructure.
Brownfield PPPs in sports infrastructure: There is a pressing case for PPPs in sports’
infrastructure development in India to augment and maintain sports facilities and for
tapping private sector efficiencies in management of infrastructure. An integrated
multi-use sports infrastructure development model, focusing on optimisation of sports
facilities by hosting sporting and non-sporting events, upgrading sports infrastructure
technology and mixed-use urban development, can drive the provision of world class
sports infrastructure. Limited funding avenues for sports and lack of state-of-the-art
facilities make a strong argument for attracting private capital in sports infrastructure
development through brownfield PPP models. Under a PPP framework, private sector
efficiencies in design and management can revitalise the facilities and usage.
Sports facilities have strong latent demand: The existing sports stadiums provide
infrastructure for user groups that pursue sports as a career. There is a strong demand
for sports facilities that tap an additional user segment who play games/sports for
entertainment, fun, and rejuvenation. Investments in sports, leisure and such recreational
facilities have a positive impact on the regeneration of urban centres, including:
!Building a strong community spirit
!Providing opportunities for young people to develop lifelong skills
!Increasing the motivation and self-esteem of young people
!Attracting people from outside the area to work and participate in newly developed communities
!Improving the health and lifestyle of people in the local community
!Increasing the economic profile of the area
3.12.2 Assets considered for monetisation
The assets considered for monetisation during FY 2022-2025 cover 2 national stadiums (JLN and one more national stadium to be identified) and 2 SAI regional centres (at Bangalore & Zirakpur). The mode of monetisation for the identified assets will be PPP based concessions on OMDA model.
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actual capex may take place over a 3-4 year period. Further, any concession fee, upfront
premium and revenue share payments to authority are over and above this indicative
monetisation value and will be discovered based on market testing with transaction.
Approach to monetisation
The assets considered for monetisation include specific assets for which ministry has identified specific plans towards the development of the facilities under brownfield PPP mode. Capex approach has been adopted to determine the indicative monetisation value for stadium assets. The estimated capex has been considered as the approach to estimate the monetisation value. This is only an indicative value at this stage and actual valuation will be arrived at based on detailed feasibility and transaction preparation stage.
3.12.3 Indicative Value of assets and phasing
The total value of assets considered for monetisation is estimated at Rs 11,450 crore for FY 2022-2025, with capex phasing as follows:
aFY 2022 –Rs.1,650 crore
aFY 2023 – Rs 2,100 crore
aFY 2024 – Rs.3,200 crore
aFY 2025 – Rs.4,500 crore
3.12.4 Marquee project: Development of JLN Stadium
Jawaharlal Nehru (JLN) Stadium in New Delhi is expected to be a pioneer in creating a financially sustainable sporting model in India through an OMDA-based PPP concession agreement for integrated development with shared usage of sports facilities. There is a pressing need for financial sustainability in sports and to explore mixed-use areas that are connected and accessible to promote sporting culture. Hence, the PPP framework is being explored to tap private sector efficiencies in design and management, which can revitalise the facilities and optimise usage.
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S.No. Facility Seating/Capacity
1 Main Arena 60,000 (fixed)
2 Auditorium 2,172 (fixed)
3 Hostel complex 140 rooms + 100 u/c
4 Indoor sports Table Tennis (2)
5 On Ground
facilities
2nd Football
ground, Archery,
Cricket practice net,
Volleyball, Handball
Responsibility SAI Operator
Site access √
Bid Procedure and criteria
√
Set the design & specs
√
Contract monitoring √
Commercial revenues
√
SPorting zone revenues
√ √
O&M√
Figure 22: Snapshot of the JLN stadium asset (New Delhi)
OMDA-based model for monetisation of sports stadiums/
complexes
Rationale
The PPP concept envisages that the selected PPP concessionaire will be given the
rights for development and commercialisation of the sports facility through an OMDA.
The project structure envisages grant of a concession to a private operator to operate,
maintain and augment or redevelop and upgrade the existing facilities at the stadium.
As part of the concession, the private partner may be granted development rights at
the site subject to compliance with applicable local laws.
Salient features of the OMDA-based PPP model
Scope: The scope of such concessions would entail getting the existing asset at site into
the specified condition over an initial development period; developing, operating and
maintaining an additional infrastructure at a designated site; operating and maintaining
the asset for the concession period followed by transfer back of the asset at the end
of the concession in the specified condition. The nature of additional infrastructure
may be specified upfront and should be complementary to the existing site usage.
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A concession period of 30 years may be explored, extendable by another 30 years
subject to asset life and viability considerations.
Revenue streams for concessionaire
!Commercial lease rentals
!User fees from sports facilities (sports club and memberships)
!Space renting for sports/ non-sports events and food and beverages for events
!Parking, entry fees, advertisements, etc
Authority’s users and events
!Year-round access to the authority’s designated users and campers at regulated
charges
!Pre-specified event roster and event day-sharing for the authority’s sports and other events
Authority revenue
!Revenue share
!Annual concession fee
!Upfront premium
Indicative transaction structure of OMDA-based sports stadiums/ complex is depicted in the exhibit below.
Concessionaire / SPV
Design & upgradation of all facilities
Financing the augmentation O&M of
entire facility Revenues from mix use
Handback of asset at the end
Authority
Site access
Approvals & clearances
Regulation of Sports zone
Contract monitoring
Commercial Rentals (Sports Zone
& non-sports Zo ne)
Parking, space rent out, F&B
revenues, Club membership
Addl. Revenue streams could be
specified in the agmnt.
Revenues
Escrow & Substitution rights
Specified
Revenue Share
End-Users
Bid variable:
Upfront premium (payment
schedule given by Authority
in the CA)
Flow of funds
Contractual
arrangement
Lenders Investors
Sports + Commer
cial
Grant of co ncession
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Redevelopment of Colonies
Ministry of Housing & Urban Affairs (MoHUA) owns and manages land through the Land
and Development Office (L&DO). During the NMP period, the following projects pertaining
to redevelopment of colonies are being envisaged. PPP based model is recommended for
redevelopment of such GPRA projects cross subsidized through sale / lease of commercial
BUA.
Proposed projects are real-estate projects which envisage mixed use redevelopment of a
vacant tract / brownfield sites at prime locations in Delhi–NCR. They entail development
of general pool residential accommodation and commercial office complexes in one of
the most prime areas of the country through a self-funded mechanism.
Considering the prime location and attractive commercial potential of the Project,
development of these projects is recommended through private sector participation. This
will not only enhance the commercial and operational efficiencies but also ensure upfront
/ periodic consideration to the Authority / Ministry of Housing and Urban Affairs.
Table 21:
Identified projects–Redevelopment of Colonies
Housing redevelopment Assets
CategoryLocations / particulars
Estimated Investment
(Rs crore)
Redevelopment of 7 General
Pool Residential Accommodation
(GPRA) Colonies in Delhi
Sarojini Nagar
Naoroji Nagar
Netaji Nagar
Sriniwaspuri
Thyagraj Nagar
Mohammdpur
Kasturba Nagar
32,276 crore
Development of residential /
commercial units on 240 acre
land in Ghitorni (Delhi) 8000 units of GPRA
3000 units for migrant
construction workers 15,000 crore
Under a PPP based model for such projects, the entire land parcel should be transferred
into an SPV owned by the Authority with requisite change of land use etc wherever
required. Multiple statutory clearances are typically required for such Projects which
should be pre-obtained by the Authority and housed in the SPV. The SPV should then be
bid out under PPP mechanism through a transparent competitive bidding system.
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The total asset universe considered for the exercise are the hotel assets under the central
sector agencies India Tourism Development Corporation (ITDC) under administrative
control of the Ministry of Tourism. ITDC is running hotels, restaurants at various places
for tourists, besides providing transport facilities. The present network of ITDC consists
of 4 Ashok Group of Hotels, 4 Joint Venture Hotels, 7 Transport Units part of the travel
& tourism infrastructure, 14 Duty Free Shops at Seaports, 1 Sound & Light Show and 4
Catering Outlets. The hotel assets under ITDC comprise of the following:
Table 22:
Identified projects–ITDC Hotel assets
S.NoHotel NameLocation
1 Hotel PondicherryPuducherry
2 Hotel KalingaBhubaneshwar
3 Hotel RanchiRanchi
4 Hotel NilachalPuri
5 Hotel Anandpur SahibRupnagar
6 Hotel SamratNew Delhi
7 Hotel AshokNew Delhi
8 Hotel Jammu AshokJammu
ITDC is exploring monetisation of its properties which have been considered under the
monetisation pipeline. Major assets which are under various stages of discussion as
following:
Joint leasing of Hotel Pondicherry Ashok, Puducherry
O&M contract for Hotel Kallinga Ashok, Bhubaneshwar
Divestment of Hotel Ranchi Ashok, Ranchi
Divestment of Hotel Nilachal, Puri
Transfer of ownership of Anandpur Sahib Hotel
Subleasing of Hotel the Ashok, New Delhi
O&M contract for Hotel Samrat, New Delhi
O&M contract for Hotel Jammu Ashok, Jammu
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Potential to leverage the Brand Value of Ashok Group – The Ashok group of hotels is
the flagship hotel chain under ITDC which have a brand value developed over last 40-
50 years and has been the centre stage for all government events organised by various
ministries and public sector entities. The Ashok hotels has been the key part of major
Conferences, Exhibitions, Workshops/ Seminars and other National and International
events organised.
Government push for underutilised assets – ITDC chain of hotels being placed at ~125
acres of land parcels spanning across major cities across the country have not been
utilised to their maximum potential.
Strategic Location Advantage – ITDC hotels have the location advantage as majority
of the hotels are placed at the heart of the city in prime locations (Hotel the Ashok,
Hotel Samrat, Hotel Kalinga etc.).
All 8 hotel assets of ITDC have been considered for monetisation during FY 2022 to 2025.
Long-term leasing, divestment, long term OMT contract may be explored as potential
models for monetisation to be ascertained on a case to case basis as per detailed asset
level due diligence.
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Plan
4
This section highlights
the framework for
monitoring progress
of transactions
forming part of
the NMP.
Implementation Plan 95
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escalation matrix for real time monitoring of progress. This will help all stakeholders
in monitoring the implementation of projects by comparing actual progress vis-a’-vis
planned pipeline for the NMP assets. Which in turn will ensure effective programme
implementation. The figure below captures the monitoring and evaluation tools available
with an objective to help all stakeholders monitor the implementation and progress of the
NMP projects. Real time monitoring will be undertaken through the asset monetisation
dashboard, as envisaged under Union Budget 2021-22.
The basic elements of the monitoring and evaluation framework are highlighted in figure
below.
Figure 23: Implementation framework
The programme is envisaged to be supported through necessary policy and regulatory interventions by the Government in order to ensure an efficient and effective process of asset monetisation. These will include streamlining operational modalities, encouraging investor participation and facilitating commercial efficiency, among others. Union Budget 2021-22 has been a witness to commitment of the Government in this regard.
Further, the initiative mandates adoption of innovative models and extensive private
sector collaboration, which in turn necessitates augmentation of knowledge base and
capacity at the sponsoring ministries/ public sector entities level. Such knowledge and
capacity is proposed to be shared across ministries/ public sector asset owners, in form
of guidance material, model documents etc so as to avoid redundancies and to ensure
value accretive transactions. The end objective of this initiative to enable ‘Infrastructure
Creation through Monetisation’ wherein the public and private sector collaborate, each
excelling in their core areas of competence, so as to deliver socio-economic growth and
quality of life to the country’s citizens.
96Implementation Plan Volume II: Asset Pipeline
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Annexure 97
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2022-2025
North regionStateLength (km)
Hissar–DabwaliHaryana47
4 laning of Hissar–Dabwali (2 pkgs)Haryana 145
6 laning of Panipat-Jalandhar existing Saraswati bridge Haryana1
6 laning Eastern Peripheral Expressway (Pkg 1)Haryana22
6 laning Eastern Peripheral Expressway (Pkg 3)Haryana25
Jammu bypass–UdhampurJ&K65
Chenani–NashriJ&K12
Jhansi ShivpuriUP / MP35
Indore–KhalghatMP80
Lakhnadon–MahagaonMP57
Patiala bypass-Sangrur bypassPunjab61
Sangrur bypass (BP)–Tapa incl. Sangrur & Dhanuala BPPunjab59
Farukhanagar–Kottakatta (NS 2 / AP 3)Haryana46
Farukhanagar–Kottakatta (NS 2 / AP 4)Haryana33
Agra bypassUP33
6 laning Eastern Peripheral Expressway (pkg 2)Haryana25
6 laning Eastern Peripheral Expressway (pkg 4)Haryana22
6 laning Eastern Peripheral Expressway (pkg 5)Haryana21
6 laning Eastern Peripheral Expressway (pkg 6)Haryana22
Agra BharatpurUP / Rajasthan 45
Orai BaraUP61
Cable stayed bridge at Naini and approachUP4
Fatehpur KhokharajUP58
Chakeri UsraniaUP21
Allahabad–Handia–VaranasiUP72
Chhindwara–Amarwara incl. Chhindwara ORR sectionMP123
Chhindwara (from Ring Road)–SeoniMP61
Amarwara–NarsinghpurMP70
Amritsar–WagahPunjab36
Total29 stretches 1361 km
East regionState Length (km)
Hazipur-Muzaffarpur on NH-77 and NH-28Bihar39
Chas-Ramgarh (2 sections)Jharkhand 77
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Sunakhala–BhubaneshwarOrissa76
Bhubaneshwar–PuriOrissa59
Palsit–DankuniWest Bengal 64
Panagarh–PalsitWest Bengal 67
Purnea–Dalkhola
West Bengal /
Bihar
36
Dalkhola–IslampurWest Bengal 88
Islampur–Sonapur–GhoshpukurWest Bengal 44
Salsalabari to West Bengal Assam borderWest Bengal 26.5
Kotwa–Mehsi–MuzaffarpurBihar80
Khagaria–PurneaBihar70
Muzaffarpur–SonbarsaBihar142
Chandikhol BhadrakOrissa75
Aurangabad–BarachettiBihar60
Gorhar–Barwa AddaJharkhand 79
Bhadrak BalasoreOrissa63
Barachetti–GorharBihar80
Chandikhol ParadipOrissa77
Mokama MungerBihar69
Shillong bypassAssam49
Total22 stretches 1478 km
West regionState Length (km)
Chittorgarh-Kota and Chittorgarh bypassRajasthan 161
Palanpur-Abu RoadGujarat / Rajasthan 45
Abu Road–SwaroopganjRajasthan 31
Vadodara–Surat Gujarat7
Bharuch–Surat (6 lane) (BOT-II)Gujarat 65
Bharuch–Surat (6 lane) (BOT-I)Gujarat 83
Saoner-ChindwaraMaharashtra 76
Deodhari-Kelapur
Gujarat /
Maharashtra
30
Borkhei-Wadner-Deodhari
Gujarat / MP
border
86
Kelapur-Maharashtra/Telangana borderMaharashtra 23
Pimpalgaon Nashik GondheMaharashtra 57
MP/Maharashtra border-DhuleMaharashtra 89
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Kondhali-TalegaonMaharashtra 50
Talegaon-AmravatiMaharashtra 58
Baran-ShivpuriRajasthan/MP 121
Reengus-SikarRajasthan 44
Jaipur-KishangarhRajasthan 90
Bharatpur–MahuaRajasthan 57
Mahua–JaipurRajasthan 108
Jaipur-ReengusRajasthan 52
Suratgarh–Sri GanganagarRajasthan 78
Kota to Chittorgarh (RJ-7 and RJ-8)Rajasthan 128
Rajasthan & Gujarat Palanpur-SwaroopganjGujarat / Rajasthan 76
Kota-Baran-Shipuri–Jhansi
Rajasthan / MP /
UP
300
Total25 stretches 2031 km
South regionState Length (km)
Kothakota Bypass–KurnoolA.P.75
Maharashtra/Karnataka border to BelgaumKarnataka 78
Hyderabad-Bangalore (6 sections)A.P. / Karnataka 251
Chikalurper–Vijaywada (6 laned)A.P.68
AP/Karnataka Border–DevanhalliKarnataka 72
Nandi Hill crossing & Devenhalli to Meenu Village AP/KA
border
Karnataka 61
6 laning of Bangalore-Hosur section of NH-7Karnataka 14
AP/KA border–Nandi Hill crossing & Devenhalli to Meenu
kunte Village
Karnataka 61
Ulundurpet–Padalur (pkg VI B)Tamil Nadu 94
Ulundurpet–Tindivanam (pkg VI A)Tamil Nadu 73
Trichy–Padalur (pkg VI C)Tamil Nadu 38
Krishnagiri–Thopurghat (NS 2 / TN 1)Tamil Nadu 63
6 laning of Hosur–Krishnagiri Tamil Nadu 60
Kadtal-ArmurTelangana 31
Adloor Yellareddy–CheguntaTelangana 52
Chegunta–BowenpallyTelangana 62
MH/AP border to Islamnagar (NS-2 / BOT / AP-8)A.P.55
Farukhanagar–Kottakatta (NS 2 / AP 3)Haryana46
Farukhanagar–Kottakatta (NS 2 / AP 4)Haryana56
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Kadloor Yellareddy to Gundla PochampaliTelangana 86
Hyderabad-Bangalore (NS-2 / BOT / AP-7)
Karnataka /
Telangana
75
Tambaram–TindivanamTamil Nadu 46.5
Hadadi–Devgiri
Karnataka /
Maharashtra
80
Hadadi–DoddasiddanahallyKarnataka 71
Gabbur–DevgiriKarnataka 64
Hattargi – HirebagewadiKarnataka 22
Trichy–Karaikudi including Trichy bypass (2 sections) Tamil Nadu 117
Total28 stretches1,931 km
101Annexure Volume II: Asset Pipeline
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NITI Aayog
Designed by
NATIONAL
MONETISATION
PIPELINE
VOLUME II: ASSET PIPELINE
VOLUME II vol-2_National Monetization Pipeline.indd 102vol-2_National Monetization Pipeline.indd 10217/08/21 12:12 PM17/08/21 12:12 PM
Copyright © NITI Aayog, 2021
NITI Aayog, Sansad Marg,
New Delhi-110001
Designed b y
NATIONAL
MONETISATION
PIPELINE
VOLUME I: MONETISATION GUIDEBOOK NATIONAL MONETISATION PIPELINE
Volume I : Monetisation Guidebook
GOVERNMENT OF INDIA
NEW DELHI Infrastructure is critically linked to growth and economic performance. Benefits of higher
investment in good quality Infrastructure manifest in the form of increased employment
opportunities, access to market and materials, improved quality of life and empowerment
of vulnerable sections. Recognizing the importance of infrastructure, the Government has
continued its focus on sustaining and stepping up the pace of infrastructure investment.
Investment led growth is therefore, central to the economic agenda of the Government
and one of the pre-requisites of Investment led growth is capital and asset recycling. Asset
recycling and monetization is the key to value creation in Infrastructure by serving two
critical objectives, unlocking value from public investment in Infrastructure and tapping
private sector efficiencies in operations and management of infrastructure.
Under the Union Budget 2021-22, Monetization of Assets has been identified as one of
the three pillars for enhanced and sustainable infrastructure financing in the country. The
Budget also envisioned preparation of a “National Monetisation Pipeline” (NMP) to provide
a direction to the monetisation initiative and visibility of investors. In pursuance of the
same, NITI Aayog was tasked with creation of the National Monetisation Pipeline (NMP)
for brownfield core infrastructure assets.
The NMP has been created to be co-terminus with the balance NIP period, 4 year period
from FY2022 to FY2025. The NMP has been prepared based on inputs and consultations
from the respective line ministries and departments along with an assessment of the total
asset base available. The NMP document has been developed and is structured as two
volumes (Volume I & II) wherein the Volume I is being developed as a Guidebook comprising
of conceptual overview, instruments, steps involved and key reform imperatives. Volume II
comprises of the pipeline of Central Government ministries / sector wise citation of assets
along with phasing and overview of assets. The NMP is meant to serve as an essential
roadmap for the Asset monetisation of various brownfield infrastructure assets across
roads, railways, shipping, aviation, power, telecom, oil & gas, and warehousing sectors.
Asset monetisation, based on the philosophy of ‘Creation through Monetisation’, will
tap institutional investment and long term patient capital into stable mature assets in
turn generating financial resources for new infrastructure asset creation . This will enable
Preface
iii.!"! economic growth, generating employment opportunities and better prospects for
country’s youth.
Availability of a sustained and robust asset pipeline has been cited as a key concern
by investors to the Government at various forums. A well laid out pipeline hence gives
a comprehensive view to investors & developers of brown-field investment avenues in
Infrastructure. The NMP will also form a baseline for the asset owning ministeries for
monitoring and tracking performance of the potential assets. The NMP is aimed at creating
a systematic and transparent mechanism for public authorities to monitor the initiative
and for investors to plan their future activities. I hence consider the NMP document to be
a critical step towards making India’s Infrastructure truly world class.
The Government as part of a multi-layer institutional mechanism for overall implementation
and monitoring of the Asset Monetization programme, has constituted an empowered
Core Group of Secretaries on Asset Monetization (CGAM) under the chairmanship of
Cabinet Secretary. Detailed deliberations with the line Ministries and Departments on
the asset pipelines have been undertaken at the meetings of the CGAM chaired by the
Cabinet Secretary.
The NMP is a culmination of insights, feedback and experiences consolidated through
consultations with the concerned line Ministries and Departments, multi-stakeholder
consultations and a series of one-to-one consultations with prominent global investors
conducted over the last six months.
Asset Monetisation programme and the NMP took shape because of the vision and
conviction of our Hon’ble Prime Minister who has always encouraged us to pursue
excellence in delivering Infrastructure to common citizen of India. I am grateful to Hon’ble
Finance Minister for the landmark Union Budget 2021, her inspiration and encouragement
that made this report possible. In this endeavour, we owe our deepest gratitude to the
Cabinet Secretary, under whose guidance, the Monetisation programme has and continues
to gain momentum. I also thankfully acknowledge the support provided by the members
of the CGAM, Secretary (DEA), Secretary (Revenue), Secretary (Expenditure), Secretary
(DIPAM), Secretary (DPE), Secretary (Corporate Affairs), Secretary (Legal Affairs) and all
the Secretaries of the relevant ministries and departments in development of the NMP.
None of this would have materialised without the unflinching support and guidance of the
head of our institution, Dr. Rajiv Kumar, Vice Chairperson who inspired us in our endeavour
to prepare and launch the NMP with a vision to serve as a roadmap for India’s Asset
Monetisation programme. Finally, a deep sense of gratitude to the Asset Monetisation
team at NITI Aayog : Partha Sarathi Reddy, Alpna Jain, Arpana Bhatt and Sujit Jena, for
their remarkable efforts in working relentlessly during the pandemic to research and create
the NMP. Lastly, the support provided by CRISIL team towards our work on NMP needs
a special mention.
We thank all the members for their support and contribution.
New DelhiAmitabh Kant
July, 2021CEO, NITI Aayog
iv . ! " fi! Volume I: Monetisation Guidebook
1. Infrastructure Imperative 1
1.1 Infrastructure: An Enabler of Growth 2
1.2 Investment Plan & Financing under NIP 3
1.3 Initiatives under Union Budget 2021-22 4
1.4 Asset Monetisation – The Concept 4
1.5 National Monetisation Pipeline 7
1.6 Organization of this Guidebook 8
2. Asset Monetisation— Framework and Instruments 9
2.1 Core Asset Monetisation 10
2.2 Core Asset Monetisation Framework 12
2.3 Monetisation Models 14
2.4 Direct Contractual models – Brownfield PPP Concessions 16
2.5 Long Term Lease 23
2.6 Infrastructure Investment Trust 24
2.7 Real Estate Investment Trust 29
.8 Factors determining choice of model 34
3. Asset Monetisation Experience: India and Beyond 35
3.1 Australia’s Asset Recycling Initiative (ARI) 36
3.2 Indonesia’s Limited Concession Scheme (LCS) 40
3.3 REITs in non-traditional real estate sectors 42
3.4 Other notable transactions 44
Contents
vContents 4. Preparatory Stage 47
4.1 Overview 48
4.2 Step 1 – Preparation of asset monetisation and financing plan 48
4.3 S<> tep 2 – Asset Screening and Packaging 49
4.4 S<> tep 3 – Transaction Structuring 50
4.5 S<> tep 4 – Approval/ sanction 51
5. Transaction Stage 53
5.1 InvIT – Regulatory framework and process 54
5.2 REIT – Regulatory framework and monetisation process 57
5.3 PPP Concession based models – Framework and process 60
6. Key imperatives for Monetisation 63
6.1 Recent initiatives by Government of India 64
6.2 K<> ey Imperatives 66
7. Annexure 71
Annexure I : Circulars, rules and guidelines pertaining to InvIT 72
viContents Volume I: Monetisation Guidebook LIST OF FIGURES
Figure 1: Infrastructure Vision 2025: Meeting aspirations and improving ease of living 2
Figure 2: Sources of financing for NIP 3
Figure 3: Initiatives under Budget 2021-22 4
Figure 4: Asset Monetisation Structure 6
Figure 5: Infrastructure Asset Monetisation Cycle 6
Figure 6: Objectives of the National Monetisation Pipeline 7
Figure 7: Core and Non-Core Asset Classes 10
Figure 8: Asset Monetisation Eco-System and Benefits to Stakeholders 13
Figure 9: Framework features for Core Asset Monetisation 13
Figure 10: Core Asset Monetisation approaches 15
Figure 11: Brownfield PPP Models 16
Figure 12: OMT Broad Structure 17
Figure 13: OMD Structure 20
Figure 14: Long term Lease Models 23
Figure 15: InvIT transaction – Illustrative structure 25
Figure 16: Key Benefits of InvIT 26
Figure 17: InvIT transaction – Illustrative steps 27
Figure 18: REIT transaction – Illustrative structure 30
Figure 19: Benefits and Limitations of REIT 31
Figure 20: Illustrative ARI process 37
Figure 21: Major public assets monetised under the ARI 38
Figure 22: Notable investors participating in Australia’s Asset Recycling Initiative 38
Figure 23: Key features of Indonesia’s LCS initiative 41
Figure 24: Process roadmap 48
Figure 25: Sectorial investment and financing plan – Illustrative steps 49
Figure 26: Steps in project structuring 50
Figure 27: End to End Process for Project Preparation 51
Figure 28: Elements of SEBI InvIT Regulations 54
Figure 29: Step by Step Issuance Process 56
Figure 30: Procedure for Public Procurement 61
Figure 31: Imperatives for Asset Monetisation 67
viiContents Volume I: Monetisation Guidebook LIST OF TABLES
Table 1: Snapshot of Infrastructure asset base under key public sector entities 11
Table 2: Features of Direct Contractual mode 15
Table 3: Features of Structured Financing Instruments 15
Table 4: Key Terms of an OMT Concession 17
Table 5: TOT bundles bid out by NHAI till date 18
Table 6: Key Terms of an OMD Concession 20
Table 7: Key Features of Lease 24
Table 8: Key Requirements/ Terms of an InvIT 26
Table 9: Key InvIT transactions 27
Table 10: Key Requirements/ Terms of an REIT 30
Table 11: REIT transactions in India 33
Table 12: Salient features of SEBI InvIT Regulations 2014 54
Table 13: Salient features of SEBI REIT Regulations 2014 57
viiiContents Volume I: Monetisation Guidebook AcronymDefinition
Acronym Definition
AAIAirports Authority of India
BOOBuild-Own-Operate
BOQBill Of Quantities
BOTBuild-Operate-Transfer
BPCLBharat Petroleum Corporation Ltd
BSEBombay Stock Exchange
BSNLBharat Sanchar Nigam Limited
CCOCoal Controller’s Organisation
CEOChief Executive Officer
CERCCentral Electricity Regulatory Commission
CILCoal India Limited
CODCommercial Operations Date
CPSECentral Public Sector Enterprise
CRWCLCentral Railside Warehouse Company Limited
CWCCentral Warehousing Corporation
DFCCIL Dedicated Freight Corridor Corporation of India Limited
DFIDevelopment Finance Institution
DWTDeadweight Tonnage
EPCEngineering, Procurement and Construction
ESGEnvironmental, Social and Governance
FBBFixed Broadband
FCIFood Corporation of India
List of
Abbreviations
ixList of Abbreviations FDIForeign Direct Investment
GAILGas Authority of India Limited
GISGeographic Information System
HAMHybrid Annuity Model
HPCLHindustan Petroleum Corporation Limited
IDBIIndustrial Development Bank of India
IOCLIndian Oil Corporation Ltd.
IPAInitial Portfolio of Asset
IRSDCIndian Railway Stations Development Corporation Limited
JLNJawaharlal Nehru Stadium
JNPTJawaharlal Nehru Port Trust
LFPLand Fall Point
LILOLoop-In-Loop-Out
LMTLakh Metric Tonnes
LNGLiquefied Natural Gas
LPGLiquefied Petroleum Gas
MCAModel Concession Agreement
MCLRMarginal Cost of Funds-based Lending Rate
MDOMine Developer and Operator
MFCMulti-functional Complexes
MIRAMacquarie Infrastructure and Real Assets
MIVMaritime India Vision
MMLHMulti Modal Logistics Hub
MMTPAMillion Metric Tonnes Per Annum
MTNLMahanagar Telephone Nigam Limited
MTPAMillion Tonnes Per Annum
MVAMega Volt Amp
NBFIDNational Bank for Financing Infrastructure and Development
NDCPNational Digital Communications Policy
NHAINational Highways Authority of India
NHPCNational Hydroelectric Power Corporation
NIPNational Infrastructure Pipeline
NITINational Institution for Transforming India
NLCNLC India Limited (formerly Neyveli Lignite Corporation Limited)
NMPNational Monetisation Pipeline
NRPNational Rail Plan
NSENational Stock Exchange
xList of Abbreviations Volume I: Monetisation Guidebook NSECNetaji Subhas Eastern Regional Centre
NSSCNetaji Subhas Southern Centre
NSWCNetaji Subhas Western Centre
NTPCNational Thermal Power Corporation Limited
OFCOptical Fibre Communication
OHEOver Head Equipment
OMDAOperations, Management and Development Agreement
OMTOperate Maintain and Transfer
ONGCOil and Natural Gas Corporation Limited
ORROuter Ring Road
PEGPrivate Entrepreneurs Guarantee
PFCPower Finance Corporation
PFTPrivate Freight Terminal
PGCILPower Grid Corporation of India Limited
PNGRBPetroleum and Natural Gas Regulatory Board
PPPPublic-Private Partnership
PUAPipeline Usage Agreement
RECRural Electrification Corporation
REITReal Estate Investment Trust
RFPRequest for Proposal
RFQRequest for Qualification
ROWRight of Way
RPORenewable Purchase Obligations
RTMRegulated Tariff Mechanism
SAISports Authority of India
SARODSociety For Affordable Redressal Of Disputes
SEBISecurities and Exchange Board of India
SECISolar Energy Corporation of India
SJVNLSatluj Jal Vidyut Nigam Limited
SPVSpecial Purpose Vehicle
STPSSuper Thermal Power Station
TBCBTariff Based Competitive Bidding
TEUTwenty Feet Equivalent Unit
TOTToll-Operate-Transfer
TSATransmission Service Agreement
USDUnited States Dollar
WPIWholesale Price Index
xiList of Abbreviations Volume I: Monetisation Guidebook Infrastructure
Imperative
1
Infrastructure Imperative 1 1.1 INFRASTRUCTURE: AN ENABLER OF GROWTH
Investment in infrastructure is pivotal for accelerated and inclusive socio-economic
development of a country. In the absence of adequate and robust infrastructure facilities,
the economy operates at a sub-optimal level remaining distant from its potential and
frontier growth trajectory.
With such imperative–to bridge the existing infrastructure gaps and cater to its future
potential and needs–the Government of India (GoI) undertook a first-of-its-kind and a
whole-of-government exercise in FY 2019-20, to lay the infrastructure vision for the country.
Pursuant to which, the National Infrastructure Pipeline (‘NIP’), detailing the infrastructure
vision for the country, was released in December 2019. As per the Report of the Task
Force for NIP:
‘..The vision, mission and strategic goals would be towards improving the ease of
living or physical quality of life for each individual in the country. And investment in
infrastructure would aim to achieve the aspirational standards in consonance with SDG
-2030 for same..’
Imperativeness of such vision and large-scale infrastructure investment has only been
more pronounced with the recent coronavirus (COVID) pandemic. With the crisis taking
an unprecedented toll on the economic activity in the country, significantly enhanced
level of infrastructure investment is critical for reviving growth. Furthermore, the crisis
has emphasised the need for resilient, environmentally sustainable and technologically
advanced infrastructure systems, which in turn necessitates targeted approach towards
SDG based aspirational standards under NIP.
Figure 1: Infrastructure Vision 2025: Meeting aspirations and improving ease of living
2Infrastructure Imperative Volume I: Monetisation Guidebook 1.2 INVESTMENT PLAN & FINANCING UNDER NIP
During the twelfth plan period, infrastructure investment in India aggregated to Rs 36 lakh
crore, averaging at ~5.8% of GDP. Further, for FY 2018 and 2019 it has been estimated at
~Rs 10 lakh crore
1
. Going forward, the NIP envisions a significant step-up from the current
levels. This is largely in view of recommended infrastructure investment levels of 7-8% of
GDP
2
, so as to ensure requisite capacity and quality of infrastructure within the country.
NIP envisages infrastructure investment of Rs. 111 lakh crores over five-year period from
FY 2020 to FY 2025. With annual average investment of ~Rs. 22 lakh crore, this is a
significant step-up (~2.5 times) vis-à-vis historical levels of spending on infrastructure.
Achievement of incremental annual investment of 2-3% of GDP
3
, as envisaged under NIP,
has the potential to enable double digit economic growth (for corresponding period)
for the country. Which in turn will ensure enhanced economic activity and employment
opportunities in a post-crisis economy. Successful and timely implementation of projects
planned under NIP, hence, remains a key focus area for both Central and State Governments.
One of the major pre-requisites for this, however, is the availability of capital. Under NIP,
traditional sources are expected to finance 83–85%
4
of the envisaged capital expenditure.
This includes ~18-20% financing through Centre’s budgetary resources and 24-26% through
the States’ budgetary resources. Another ~40% is proposed to be raised through extra-
budgetary resources/ private sector investment (in form of debt from bond markets/
banks/ non-banking financial companies, by way of equity from private developers/
internal accruals of PSUs and external aid from multilateral/ bilateral agencies).
Further, as estimated by the NIP task force report, about 15-17% of the outlay is to be
met through innovative and alternative initiatives viz. asset monetisation, funding through
a new Development Finance Institution (DFI) etc. Of which asset monetisation has been
suggested as a tool to monetise operational assets at both Central and State levels.
Budgetary Sources Private or Extra Budgetary Sources
Innovative and
alternative
financing sources
Central Budget (18-20%)
Financing by Banks (8-10%)
Innovative and
alternative financing
(15-17%)
Bond Markets (6-8%)
State Budget (24-26%)
Infrastructure NBFCs (15-17%)
PSU Accruals, Equity and Others
(8-15%)
Figure 2: Sources of financing for NIP
1 Report of the Task Force for National Infrastructure Pipeline (DEA, Ministry of Finance)
2 Economic Survey 2018-19
3 Based on envisaged outlay, as percentage of GDP, vis-a’-vis previous period investment during
FY 2013-19
4 Report of the Task Force for National Infrastructure Pipeline (DEA, Ministry of Finance)
3Infrastructure Imperative Volume I: Monetisation Guidebook 1.3 INITIATIVES UNDER UNION BUDGET 2021-22
GoI’s commitment towards realising the vision for country’s infrastructure has been further
put in motion via the Union Budget 2021-22. In line with the recommendations of NIP
task force report, Budget 2021-22 has laid out a three-pronged strategy for enhanced and
sustainable infrastructure financing in the country. This entails:
i. Creation of institutional structures;
ii. Thrust on monetisation of assets, and
iii. Enhanced share of capital expenditure in Central and State budgets.
~Rs 3.8 lakh crore has been allocated as capital outlay for various infrastructure projects
under Union Budget 2021-22
5
. This is broadly in line with the recommended quantum
of funding for the corresponding period, through Central budgetary resources, under
NIP. Such enhanced budgetary outlay
6
, in addition to accelerating projects envisaged
under NIP, is aimed at inducing a multiplier impact
7
towards fulfilling the more immediate
objective of reviving economy in a post COVID scenario.
From a medium to longer term perspective, the Budget proposes the following initiatives
for creating a sustainable institutional framework for funding of infrastructure assets in
the country:
Development Finance Institution (DFI)Asset Monetisation
Professionally managed DFI to act
as provider, enabler and catalyst for
infrastructure financing
Monetising operating public infrastructure
assets for new infrastructure construction
National Bank for Financing Infrastructure
and Development Bill (2021) passed in
March 2021
A body corporate with initial GoI holding of
~100% (more than 26% at all times)
Initial share capital of Rs 20,000 crore
Target Lending portfolio: Rs 5 lakh crore (3
years)
National Monetisation Pipeline of potential
brownfield infrastructure assets
Asset Monetisation dashboard for tracking
progress and for providing visibility to
investors
Various assets/ asset classes targeted for
monetisation during FY 2021-22
Figure 3: Initiatives under Budget 2021-22
8
1.4 ASSET MONETISATION – THE CONCEPT
Financing of infrastructure investments requires a diversified set of alternatives, especially
so in emerging economies like India. And the scale at which it has been currently envisaged
under NIP, it can only be made possible through a re-imagined approach, and a look
5 Union Budget 2021-22 – Expenditure Profile
6 2 times the Revised Estimates for FY 2020-21 as per Union Budget 2021-22 – Expenditure Profile
7 2X based on comparative assessment of countries by S&P Global ratings (2018);
8 Para 45 (DFI) and Para 47 (Asset Monetisation) under Budget 2021-22
4Infrastructure Imperative Volume I: Monetisation Guidebook beyond the traditional sources or models of financing. It is, therefore, that NIP has
emphasized on innovative mechanisms–such as asset monetisation–for generating
additional capital.
The need for adoption of such alternative mechanisms
has only been further pronounced in the wake of
COVID-19. On one hand, the budgetary imperatives
of social sector priorities and economic stimuli limit
fiscal headroom. While simultaneously, reduction in
risk appetite of private developers/ equity investors
and debt financiers. limit private investment in
greenfield infrastructure. This invariably necessitates
innovative mechanisms, structured around mature
brownfield assets, for tapping of private sector
investment.
A sizeable inventory of infrastructure assets has been created over the past decade through
public investments. This can now be leveraged for tapping private sector investment and
efficiencies.
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.
Which can thereafter be leveraged for augmentation/ greenfield infrastructure creation.
Asset monetisation, also commonly referred to as asset or capital recycling, is globally
a widely used business practice. This consists of limited period transfer of performing
assets (or disposing of non-strategic / underperforming assets) to unlock “idle” capital
and reinvesting it in other assets or projects that deliver improved or additional benefits.
Governments and public-sector organizations, which own and operate such assets and
are primarily responsible for delivering infrastructure services, can adopt this concept to
meet the ever-increasing needs of the population for improved quality of public assets
and service. However, suitable structuring of such transactions is extremely critical from
the perspective of public interest and service aspects.
Asset Monetisation, as envisaged here, entails a limited period license/ lease
9
of an
asset, owned by the government or a public authority, to a private sector entity for an
upfront or periodic consideration.
Transfer of such rights in lieu of an upfront/ periodic consideration is defined by a well-
defined concession/ contractual framework. This enables a balanced risk sharing framework
between the public authority and private party. The private sector entity is expected to
operate and maintain the asset based on the terms of the contract/ concession, generating
returns through higher operating efficiencies and enhanced user experience. Funds, so
received by the public authority, are reinvested in new infrastructure or deployed for other
public purposes. Such contracts include provision for transfer of asset back to the public
authority at end of such contract.
9 Sale i.e. transfer of legal ownership of assets is only envisaged in cases such as disinvestment of stake etc.
5Infrastructure Imperative Volume I: Monetisation Guidebook Public Authority
Asset / Rights
Private Investor(s)
Operations &
Maintenance
Concession
Consideration
Figure 4: Asset Monetisation Structure
Asset Monetisation needs to be viewed not just as a funding mechanism, but as an overall
strategy for bringing about a paradigm shift in infrastructure operations, augmentation
and maintenance. This is especially considering the potential for resource and capital
efficiencies as also the ability to dynamically adapt to the evolving global and economic
reality.
It presents an opportunity for public asset owners to avail new financial structures
10
and
vehicles for tapping capital from private sector investors (strategic, institutional, retail
etc). In the process, it helps public sector authorities/ entities in easing fiscal constraints
and freeing up the balance sheets for taking up more greenfield infrastructure creation.
This enables deployment of resources by government towards social sector and other
competing public priorities.
Figure 5: Infrastructure Asset Monetisation Cycle
10 Simplistic representation for purpose of conceptual understanding
6Infrastructure Imperative Volume I: Monetisation Guidebook 1.5 NATIONAL MONETISATION PIPELINE
For Asset Monetisation initiative, to progress in the right direction, it is imperative that
the Government makes available a strong pipeline of attractively structured, brownfield
projects. Further, sustained flow of transactions and visibility on same, across asset
classes, is a key pre-requisite of long-term investors. A robust asset pipeline, not only
enables investors to plan their fund raisings and investment timelines, but also helps
asset owners track and scan the performance of assets.
Within this context, National Monetisation Pipeline (NMP) was announced in the Union
Budget 2021-22 and NITI Aayog has been entrusted with the mandate to develop
National Monetisation Pipeline.
Asset Monetisation being inextricably linked to new infrastructure creation, NMP has
been planned to be co-terminus with the remaining four-year period of the National
Infrastructure Pipeline (NIP). NMP forms a baseline for the asset owning ministries for
monitoring and tracking – investment, performance and data on potential assets, for
the 4-year period from FY 22 to FY25. The Report on National Monetisation Pipeline
has been structured as a (i) Guidance book for Asset Monetisation (Volume I) and
(ii) Medium-term Roadmap including the pipeline of assets (Volume II). NIP and NMP,
together, are envisaged to give a comprehensive view on greenfield and brownfield
investment avenues in Infrastructure.fiffffi fl ff ffi flfffl
ffiffi
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Figure 6: Objectives of the National Monetisation Pipeline
NMP will prima-facie help in evolving a common framework for monetisation of core
assets. It will critically clarify its distinction from privatization, eventually helping to create a
virtuous cycle of ‘develop, commission, monetise and invest’. It will also help in identifying
potential “Monetisation-ready” projects, across various infrastructure sectors/ ministries
and simultaneously provide visibility to investors.
7Infrastructure Imperative Volume I: Monetisation Guidebook A well strategized Asset Monetisation programme:
!Is structured around:
—Monetising assets with high appetite among investors; and
—Reinvesting proceeds into assets/services that citizens desire.
!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
—Effectively incentivizing specialized investor classes (viz. domestic and foreign
pension funds, etc.)
1.6 ORGANIZATION OF THIS GUIDEBOOK
Volume I (Guidance book) is structured as a ready-reckoner for public authorities and
investors while going about the asset monetisation process, particularly in the context of
India. It presents guidance on the various models, global case studies, preparatory actions,
the regulatory framework and asset monetisation process.
The Guidance book is divided into six sections aligned with the tasks to be carried out
towards asset monetisation:
Section 1: Infrastructure Imperative: Setting the context of the Asset Monetisation;
Section 2: Asset Monetisation – Framework and Instruments: Categories,
models and instruments for asset monetisation including examples for better
understanding of structures;
Section 3: Asset monetisation experience: India and beyond: Experiences on
asset monetisation/ recycling from the developed and other emerging markets
and key takeaways;
Section 4: Preparatory Stage: Steps in identifying assets, selecting the right
instruments etc. and approval and sanction process before initiating an asset
monetisation transaction;
Section 5: Transaction Stage: An overview of the regulatory framework for
respective instruments;
Section 6: Key imperatives for Monetisation: Imperatives for efficiency and
efficacy of Asset Monetisation initiative.
8Infrastructure Imperative Volume I: Monetisation Guidebook 2
Asset Monetisation—
Framework and
Instruments
This section provides an overview
of the approach to core asset
monetisation, in India’s context.
This includes key tools,
instruments including
their broad features,
benefits and
limitations
etc.
Asset Monetisation— Framework and Instruments 9 2.1 CORE ASSET MONETISATION
The assets held by the government/ public sector entities/statutory bodies broadly include
operational/ under-construction projects, land, buildings, investment in subsidiaries/ joint
ventures etc . From amongst these,
Assets which are central to the business objectives of such entity and are used for
delivering infrastructure services to the public/ users are considered as Core Assets
for the purposes of monetisation herein.
Infrastructure
11
includes asset classes such as transport (roads, rail, ports, airports), power
generation, transmission networks, pipelines, warehouses etc. The other assets, which
generally include land parcels and buildings, can be categorised as non-core assets.
Figure 7: Core and Non-Core Asset Classes
Of the various Core Assets, assets which are currently generating revenue OR those
which have substantially completed facilities and can be suitably augmented for future
operations have been considered as potential Core Assets for monetisation herein.
2.1.1 Core Asset Base
Investment, as measured by Gross Fixed Capital Formation (GFCF), has on an average
been 30% as a component of GDP in the previous 5-year period i.e. FY 2017 – FY 2021
12
.
This capital formation has been led by mega public investment programmes such as
Bharatmala, Sagarmala, Dedicated Freight Corridor, Jal Shakti and Pradhan Mantri Awas
Yojana etc.
Owing to several years of such large-scale public investment programmes, a significant
public infrastructure asset base has been created at the level of CPSEs, departments and
11 Based on the Harmonized Master list of Infrastructure sub-sectors published by Department of Economic
Affairs
12 National Statistical Office (NSO), Ministry of Statistics and Programme Implementation
10Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook statutory entities, both within the Central as well as State government. A snapshot of
the scale of core assets, managed across key Central Government entities and sectors, is
provided in table below.
Table 1: Snapshot of Infrastructure asset base under key Central govt. public entities
13
S.No.Asset class Ministry / entity
Key asset
variable
Value
1 Roads Ministry of Road
Transport & Highways
through National
Highways Authority of
India
Length of
National Highway
network
132,499 km
14
2 Power
transmission
Ministry of Power
through Power Grid
Corporation of India
Ltd.
Transmission
network and
substations
171,950 km transmission
lines, 262 sub-stations
with 444,738 MVA
transformation capacity
15
3 Power
generation
National Thermal Power
Corporation (and its
JVs & subsidiaries)
Thermal
generation
60,224 MW
16
4National Hydroelectric
Power Corporation
National Thermal Power
Corporation
Hydro &
renewable
generation (Solar)
4,912 MW (NTPC and
its JVs & subsidiaries)
7,071 MW (NHPC)
5 Airports Airport Authority of
India
Number of AAI
airports
137 airports
17
6 Ports 12 Major Port Trusts Handling capacity
of major ports
1535 MMTPA
18
7 Telecom
Towers
Bharat Sanchar Nigam
Ltd
Mahanagar Telephone
Nigam Ltd
Number of
telecom towers
69,047 towers
8 Optical Fibre
Cable
Bharat Broadband
Network Limited
Length of optical
fibre cable
5,25,706 km (laid under
Bharatnet)
19
9 Railway
Stations
Indian Railways Number of
railway stations
pan India
7,325 stations
20
13 Asset base directly/indirectly owned or through private participation or otherwise
14 https://nhai.gov.in/nhai/sites/default/files/NationalHighwaySummary.pdf
15 https://www.powergridindia.com/company-overview-0
16 https://www.ntpc.co.in/en/power-generation/installed-capacity
17 https://www.aai.aero/en/corporate/organization
18 http://shipmin.gov.in/sites/default/files/BPS2020.pdf
19 http://bbnl.nic.in/
20 Indian Railways Annual Reports 2019-20
11Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 11Railway
Track
Indian Railways Track network 1,26,366 track km
(67,956 route length)
20
12 Natural gas
pipeline
Gas Authority of
India Ltd, Indian Oil
Corporation Ltd &
others
Length of
operational
pipeline network
19,998 km
21
13 Petroleum
& products
pipeline
IOCL, HPCL, BPCL, OIL Length of pipeline
network
14,623 km
21
14 Warehouses Food Corporation of
India,
Central Warehousing
Corporation & other
agencies
Warehousing
capacity
818 lakh MT
22
15 Sports
stadium
23
Sports Authority of
India,
Ministry of Youth Affairs
& Sports
Number of Sports
Stadia & regional
centres
5 national stadia
and various Regional
centres
24
2.2 CORE ASSET MONETISATION FRAMEWORK
Governments regularly invest in new infrastructure creation by way of budgetary
allocations. Asset Monetisation approach for such assets, enables a whole lifecycle and
system-wide perspective, combining monetisation and new infrastructure creation into a
long-term view. It leverages the capital tied up in existing infrastructure assets and aims
to reap potential benefits by monetising these assets and directly reinvesting capital
proceeds for creation of new or improvement of existing infrastructure.
Asset monetisation has two inextricably linked facets;
aLease or divestment of rights over existing assets; and
aReinvesting in new infrastructure.
While in the past, divestment of rights over existing assets has been carried out by
government and public-sector organizations, the proceeds from such divestment have
not necessarily been invested in new infrastructure creation. Further, such divestment has
largely been focussed on stakes in companies/ subsidiaries or occasionally in non-core
assets such as land or building. Lease or long-term concession of core operational assets,
in a manner which garners upfront funds and can thereafter be leveraged/ invested in
other infrastructure assets, has rather been occasional/ sector-specific. Given however the
benefits of this approach, agencies such as National Highways Authority of India have
deployed such mechanisms for upfront fund raising and new infrastructure creation. There
21 https://www.pngrb.gov.in/eng-web/data-bank.html#ngpl-1
22 https://fci.gov.in/storages.php?view=35
23 Consists of stadium assets under Ministry of Youth Affairs & Sports, additional sports stadiums under
other public entities such as Indian Railways are not included
24 Ministry of Youth and Sports Affairs Annual Report 2019-20
12Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook is now a need to systematically adopt these initiatives across varied asset classes and
streamline the frameworks and modalities of such alternatives in a manner which can be
readily absorbed, evaluated and replicated.
Figure 8: Asset Monetisation Eco-System and Benefits to Stakeholders
2.2.1 Framework features
The framework for monetisation of core assets has three key imperatives.
Figure 9: Framework features for Core Asset Monetisation
aSelection of de-risked and brownfield assets with stable revenue generation
profile (or long-term revenue rights) that can be clearly ring-fenced, is of critical
importance.
aTransaction should be structured around revenue rights as against transfer of full
ownership. Towards this, hand back of assets to the original asset owner at the
end of transaction life is a key requirement.
13Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook
aMonetisation should be viewed as structured contractual partnerships and not
privatization or slump sale of assets. Well-defined contractual frameworks should
be adopted which allow government authorities to have clearly laid down KPIs
(Key Performance Indicators) and standards for assets.
aSelection of private partner should be through a transparent mechanism and the
utilization of proceeds received should be towards well-defined uses such as new
infrastructure creation etc.
2.2.2 Considerations for contractual structuring
Infrastructure assets entail a clear need for the government to retain a degree of oversight
and control by way of either contractual mechanisms or regulations. This is because the
projects around these assets typically involve
25
:
i. Transfer of public assets including land;
ii. Delegation of governmental authority to collect and appropriate user charges
that are levied by force of law and must therefore be ‘reasonable’; Protection of
user interests and the need to secure value for public money
iii. Provision of services to users in a monopoly or semi-monopoly situation, which
imposes a special obligation on the government to ensure adequate service
quality; and
iv. Sharing of risks and contingent liabilities by the government, as applicable.
Because of such pre-requisites and nature of risks, as also involvement of multiple parties
– including project sponsors, lenders, government entities, public users and regulatory
authorities etc – monetisation of infrastructure assets can be complex. This mandates
detailed due diligence, legal and contractual agreements that clearly set forth the risks,
rewards and obligations of various participants.
Monetisation of infrastructure assets should hence be structured with a careful
consideration to protection of user interests and maximization of value to the public
authority (similar to that in case of Public Private Partnerships projects).
2.3 MONETISATION MODELS
Asset Monetisation can be undertaken through a range of instruments/ tools. This section
summarizes some of the few models, which have been utilized and have proven to be
effective in monetising brownfield assets.
26
Monetisation models which are currently being
explored/ availed may broadly be categorized into two approaches: (i) Direct Contractual
Approach and (ii) Structured Financing models.
25 Features of Infrastructure projects as identified under Procedure for Approval of Public Private Partnership
Projects
26 Models, included herein, are only some of the structures adopted/ with potential for adoption; The list is
not comprehensive and will vary based on the features of the assets and the expectations of authority,
investors and users.
14Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook ‘Direct Contractual’
Approach
Structured financing
models
Concession/ contract
between a public entity and
identified private sector
developer(s)/ investor(s)
Structured instruments for
long-term fund generation
via capital markets or
through a pool of investors
Figure 10: Core Asset Monetisation approaches
The aforementioned classification has solely been used, for the purpose of this Guidebook,
to delineate the broad principles under various models/ structures. This is only one of the
possible and indicative way to classify monetisation models and is not to be treated as
prescribed/ formal categorization of monetisation models.
In practical application, adoption of one or the other category of models would depend
upon various factors viz. asset profile, objectives for monetisation, expectations of sponsor
and investors etc. The most optimal or selected model, could hence very well be one
of the above or a hybrid structure (having features of both of the above categories) or
possibly an entirely different model.
Table 2: Indicative features of Direct Contractual mode
Transaction
Asset OR rights over such asset–Transferred to a single or a consortium of
developers and / or investors, by way of defined contractual frameworks
Consideration Upfront and/or periodic payments
Target Investor
Class
Generally, infrastructure developers, strategic investors with direct
involvement / oversight in operations
Selection modes
Through a competitive bidding process and as per prescribed guidelines
of Government
Contractual
aspects
Key performance indicators and clearly defined performance regime with
commensurate incentive or penalty mechanisms, suitable exit provisions,
termination and force majeure provisions
Prevalent
Structures
PPP concessions
Table 3: Indicative features of Structured Financing Instruments
Transaction
Partnership interest in the asset OR rights over such assets, granted to a
pool of investors (under a capital market based instrument or otherwise)
Consideration Generally Upfront
Target Investor
Class
— Institutional investors such as sovereign wealth funds, global/domestic
insurance funds, pension funds
— Retail investors
Selection modes Public listing or private placement or other such mechanisms
Prevalent
Structures
Infrastructure Investment Trust (InvIT), Real Estate Investment Trust (REIT),
Asset-back securitisation (ABS)
15Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 2.4 DIRECT CONTRACTUAL MODELS – BROWNFIELD PPP
CONCESSIONS
In the past, brownfield models have largely been focussed as management contracts –
where the obligation to provide service remains with the public authority, but the day-
to-day management of the asset is vested with the private sector. These are contractual
arrangements, with duration of typically 3-5 years – where the private sector entity is
responsible for the O&M of a part or the whole of the asset/ facility or service.
Brownfield PPP models, on the other hand, aim at roping in private sector partner for end-
to-end operation and maintenance (O&M), provision of service to users and augmentation
of asset as necessary. Various potential models for such brownfield PPP of existing
infrastructure assets owned by public sector entities/line ministries/ statutory authorities
include:
Operate Maintain Transfer (OMT) Operate Maintain Develop (OMD)
Brownfield Public Private Partnership Concessions
Toll Operate Transfer (TOT)
in Roads
Operation Management
Development Agreement
(OMDA) in Airports
Model
Adopted as
Figure 11: Brownfield PPP Models
2.4.1 Operate–Maintain-Transfer Concession
The fundamental principle under the model is to engage private sector partner for
undertaking operations and maintenance of projects. This presupposes that construction
works have been completed by the asset owner/ government and the project is amenable
to immediate revenue collection. As the existing project has established demand/ traffic
revenue streams the project structure does not suffer from volatility or unmanageable
commercial risks.
From the perspective of bidders, hence, the future revenue potential can be assessed
with a fair degree of certainty. Which enables the asset owner to be able to monetise the
project for an upfront/ periodic consideration (in form of premium/ revenue share). This
not just ensures cash inflows to the public asset owner, but also relieves it of the financial
and capacity commitments towards operations and maintenance of the project, thereby
reducing expenditure or budgetary support requirement. This is necessary for financial
and operational bandwidth to public entities for implementation of greenfield projects,
as also higher commercial and operational efficiency.
OMT contracts have seen strong impetus in road sector in India. OMT contracts are a
combination of a tolling contract and a contract for operations & maintenance. Between
16Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 2009-10 and 2014-15, NHAI has awarded a total of around 2,400 km of National Highways
to be maintained on OMT basis.
27
Figure 12: OMT Broad Structure
Table 4: Key Terms of an OMT Concession
Key Requirement
Operational asset, preferably with one complete cycle/ year of
operations
Potential Projects
Projects newly constructed and commissioned by the public asset
owner through its own funds (EPC etc.) OR
Project originally tendered out through PPP modes and for which have
concession period is complete or termination has occurred
28
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, however, depending on the asset category.
Longer concession periods with pre-defined terms of augmentation
preferable
29
Consideration
Upfront or Annual Premium (Fixed OR in form of revenue share)
Variation of model where an upfront value is bid and paid by
Concessionaire is TOT
30
Investor Class
Strategic investors or Infrastructure developer with direct involvement /
oversight in operations
Selection
Through competitive bidding process and as per prescribed guidelines
of Government
Other Terms Standard terms as in case of PPP Projects
27 CRISIL report on ‘Way forward for OMT contracts’ 2016
28 Subject to asset being suitable for operations and resolution of ensuing legal conflict (if any)
29 Major augmentation or development obligations are usually not covered under these Projects. If, however,
required, at a later stage the same may be under EPC mode and funded by the Authority. In case the
same is pre-specified and is to be funded by the concessionaire, present value of such expenditure will
be reduced from the upfront consideration to the Authority.
30 Toll Operate Transfer model has been discussed as a sub-type
17Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 2.4.1.1 Toll Operate Transfer
Toll Operate Transfer (TOT) is a variant of the OMT model, recently adopted in roads
sector, where consideration paid to the Authority is in form of an upfront premium. This
is one of the key models for monetisation successfully employed in the roads sector in
India both by Central and State entities. Ministry of Road Transport and Highways (MoRTH)
introduced the TOT concession framework in 2016 for monetisation of road assets portfolio
by National Highways Authority of India (NHAI) to long-term investors.
Toll Operate Transfer (TOT) Model
Ensures efficient management of public funded and operational national
highway projects through structured contractual partnerships with defined
KPIs and O&M standards
Provides upfront proceeds for ploughing back into greenfield national
highway development
The TOT model primarily entails securitization of the toll receivables by collecting an
upfront concession fee from the selected bidder and determined through a transparent
competitive bidding mechanism. The structure involves 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.
Till date, five rounds of TOT have been undertaken covering a stretch of 2395 km, out of
which 3 rounds have been completed – Bundle 1, Bundle 3 and Bundle 5. NHAI has raised
~Rs. 17,000 crores across these three rounds of TOT entailing toll road assets of ~1400 km.
Table 5: TOT bundles bid out by NHAI till date
S.No BundleDateLengthValue
1 TOT Bundle 1 Aug 2018 682 kmRs. 9,681 crores
2 TOT Bundle 2 Feb 2019 586 kmBid cancelled
3 TOT Bundle 3 Nov 2019 566 kmRs. 5,011 crores
4 TOT Bundle 4 Sep 2020 401 km Bid cancelled
5 TOT Bundle 5A-1 Jan 2021 54 kmRs. 1,011 crores
31
6 TOT Bundle 5A-2 Jan 2021 106 kmRs. 1,251 crores
24
Certain state government entities have also adopted the TOT model for monetising state
toll roads.
31 Bids undertaken with undisclosed IECV
18Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook In June 2020, Maharashtra State Road
Development Corporation (MSRDC)
awarded the tolling rights of Mumbai
Pune Expressway and old Mumbai-Pune
corridor (NH-48) to IRB Infrastructure
Developers for a total consideration
of Rs 8,262 crore comprising upfront
payment of Rs 6,500 crore and the
balance in staggered instalments over
a period of three years.
CASE STUDY – TOT BUNDLE 1
The first TOT model was bid out in 2018, and comprised nine highway stretches
aggregating to ~682 km in Andhra Pradesh and Gujarat, ensuring geographic
diversification. Six of these were in AP and are part of the NH-5 of the Golden
Quadrilateral connecting Kolkata and Chennai. They had a strong traffic potential given
the presence of ports, industrial clusters and consumption centres in the project vicinity.
TOT-1 toll roads had a higher share of commercial traffic at 85% vis-à-vis corresponding
national average of 75%. As against NHAI’s Initial Estimated Concession Value (IECV)
of Rs 6,258 crore, the winning bid was of Rs 9,682 crore. NHAI utilised the monetised
proceeds for funding new road projects under Bharatmala program thus diversifying
its conventional funding sources.
Key takeaways
A. Diversified asset mix, quality of underlying road assets and tenor of the
concession period are vital to attract investor interest
The location of the projects i.e. Andhra Pradesh and Gujarat, along with the overall
project influence area, and potential traffic growth played a key role in getting a
winning bid equal to almost 1.5 times the reserve price. Other contributing factors
included long concession period of 30 years, transparency in availability of historical
traffic data of project roads.
19Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook B. Adequate project preparation and key changes in the regulatory framework
have enhanced investor appetite
Detailed study and consultation were undertaken prior to structuring and rolling out the
first TOT transaction by NHAI. Also, before awarding the bundle of projects, authority
had conducted robust due diligence of the bundled projects through drone videos
and network survey vehicles for ascertaining asset condition of underlying road assets
along with current traffic patterns
2.4.2 Operate–Maintain-Develop Concession
Under the Operate Maintain and Develop structure, an asset which is operational but due
for augmentation is handed over to the private party for augmentation and O&M over
the concession period. Usually, the operations of such asset remain uninterrupted with
augmentation undertaken while the asset is operational.
The private sector raises finance on the strength of the existing assets and / or obtains
project financing along with equity contribution for undertaking such augmentation. The
private sector pays an upfront or an annual consideration (in form of a premium and / or
revenue share) and earns its returns through revenues from upgraded asset.
Figure 13: OMD Structure
Table 6: Key Terms of an OMD Concession
Key Requirement Operational asset which is due for augmentation
Potential Projects
Projects constructed and completed by public asset owner through
their own funds OR
Project originally tendered out through PPP modes and for which
concession period is complete
32
Primary Obligations
— Augmentation along with ongoing and future Operations and
Maintenance of assets;
— Provide service to users against a pre-determined/ regulated or
market-based fee;
32 Terminated projects due for augmentation may also be considered subject to resolution of ensuing legal
conflict (if any)
20Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook Concession Period 25 years or more, however, depending on the asset category.
Consideration
Annual Premium (Fixed or in form of revenue share)
And/ OR Upfront Premium
33
Investor Class Strategic investors with direct or active involvement in operations
Selection
Through a competitive bidding process and as per prescribed
guidelines of Government
Other Terms Standard terms as in case of PPP Projects
A similar structure is the Rehabilitate-Operate-Maintain-Transfer (ROMT) where an existing
asset ideally needs to be first upgraded/augmented before the operations and collection
of the revenue can be resumed. Here as well, the concession terms are generally similar to
OMD contracts with consideration for netting off the cost of rehabilitation to the Authority.
CASE STUDY: OMDA IN AIRPORT SECTOR
The development of airports through
PPP mode started in 2006 with the
Airports Authority of India (AAI) airports
at Delhi and Mumbai. The contracts were
structured as Operation, Management
and Development Agreement which
have helped create a world class airport
infrastructure.
AAI tendered out the concession of Delhi
International Airport for augmentation
& O&M with revenue share as the bid
parameter. In order to enhance the
commercial attractiveness and viability
of the project, city side real estate has
been clubbed along with. The concession
period is 30 years (renewal after 30
years) with transfer at end of period.
The Project has been completed at a
total cost of Rs 12,500 crore enabling
augmentation and long-term operation
of airport with no additional cost to AAI.
33 As consideration for value of assets received – This may be pre-determined as in case of recent leasing
of six airports (2019) or be bid parameter (with pre-defined revenue share)
21Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook Leasing of Six Airports (2019)
Airports Authority of India (AAI) undertook development of 6 brownfield airports–
Ahmedabad, Jaipur, Lucknow, Guwahati, Thiruvananthapuram and Mangalore–under
PPP mode in 2019.
The scope of work for the concessionaire entailed capacity expansion of the airports
in a phased manner along with ongoing and future O&M. It also included development,
operation and maintenance of city-side (creating infrastructure facilities adjacent to
airports like hotels, restaurants, retail shops, etc.)
34
. The concession period of these
airports was 50 years with no extension provision. Thereafter, the assets will be
handed back to the Authority i.e. AAI. The concession also envisaged a State Support
Agreement with respective state governments. The State Support Agreement is aimed
at enabling support related to removing encroachments, security and protection of
property, clearance, and utilities (like power, water supply services).
The bid parameter for the project was ‘Per Passenger Fee’ with the concessionaire
required to pay monthly fee equivalent to the aggregate of domestic user fee (product
of per passenger fee for domestic passenger and domestic passenger throughput) and
international user fee (product of per passenger fee for international passenger
35
and
international passenger throughput).
Various funds and strategic investors participated in the bid. The financial bids of the
qualified bidders for Project were opened in February 2019. The bid process enabled
receipt of approximately Rs 900 crore upfront to AAI with no expenditure and capacity
commitment over the next 50 years.
36
2.4.3 Other PPP models
The critical factor that defines an “asset monetisation” is the nature of the asset. If the
underlying asset is an active revenue generating asset with potential for utilization in a
manner which ensures higher accruals / grant savings to the authority then it may be
considered under the category of asset monetisation.
A key example is the proposed private participation initiatives in railways where the railway
station redevelopment projects (Design Build Finance Operate Transfer) are being rolled
34 The concessionaire has the right to lease/ sub-lease the land/ assets towards city-side development
35 Twice of domestic passenger fee as per terms of bidding
36 Additional quantum of funds received by AAI during FY 2021
22Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook out leveraging the existing infrastructure available with railways viz. track, signalling,
stations etc. Such assets, on account of their brownfield nature and/ or existing traffic,
allow reduced upfront investment for the concessionaire (in certain cases revenue potential
from day one) thereby ensuring higher viability. This, in turn results in higher upfront or
periodic consideration to the authority or saving of viability grant. Since such enhanced
value/ accruals to authority is reflective of the value of capital invested in the existing
asset, such transactions are considered under the asset monetisation framework.
2.5 LONG TERM LEASE
A lease is an agreement whereby the lessor confers to the lessee the right to use an asset
for an agreed period of time in return for a payment or series of payments.
While principally akin to brownfield PPP models, the primary difference in case of long-
term lease models lies in the nature of assets leased out and/or use of such assets. Long
term lease models can be adopted in case of sectors such as telecom etc. where the
license to provide an infrastructure service is already available with a private party and
the unused/sub-optimally utilised asset of public sector entity is leased out to the such
private sector party for providing service under its own license. Alternatively, such models
can be adopted in cases where an infrastructure asset viz. mine etc. is allowed for captive
usage by private sector players.
Such models can also be used for achieving asset light balance sheets or for innovative
financing
37
by public sector entities. Where the infrastructure asset or right to operate,
such assets are transferred to a private sector entity for a pre-determined period in lieu
of an upfront consideration. The public sector entity then uses such assets for providing
service to public against periodic payments. Such leases are executed on long-term basis
usually in lieu of a fixed upfront consideration or fixed periodic consideration with annual
escalation.
Long term Lease models may also be employed for urban land based assets such as
hospitality assets or bus terminals. At times, this model may also be applied in combination
with other PPP models such as Rehabilitate-Operate-Maintain–Transfer (ROMT). In such
cases, however, the contract period may be longer, and the private sector may be required
to make additional investments. The asset transfer under such a lease agreement may
happen with or without restrictions on function or usage.
Scenarios
A. Assets of public entity leased out for providing service under its own
license
Right/ License to provide an infrastructure service already available with
a private party;
B. Leasing of assets for Captive Use
C. Leasing for achieving asset light balance sheets
Figure 14: Long term Lease Models
37 Similar to sale and lease back, however, with no provision for sale of asset
23Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook Table 7: Key Features of Lease
Lease Period 10 years or more, however, depending on the asset category.
Consideration
Fixed upfront consideration OR
Annual payments with escalation
Investor Class
Existing Licensees (Scenario A); Captive Users (Scenario B) Financial
investors (Scenario C)
Potential Sectors Power, Telecom, Pipeline, Ports, Mining etc.
Benefits of such leasing transaction to the public sector entity include upfront consideration
against unused or sub-optimally utilised assets along with no liability towards regular
maintenance. While for private sector it is largely the availability of an operational asset
without any construction risks and faster roll-out of services.
Leasing – Tower assets in Telecom sector
Contracts between tower infrastructure companies and telecom operators (tenants),
which clearly spell out the overall tower requirements of the tenants, the pricing terms,
and other binding terms and conditions between the two parties. It is generally referred
to as passive infrastructure sharing and includes elements like tower space for mounting
antennas for a BTS and also associated passive equipment. BSNL and MTNL have been
renting out towers and mobile sites, respectively, to private players against rentals.
2.6 INFRASTRUCTURE INVESTMENT TRUST
Infrastructure Investment Trust (InvIT) is an innovative trust-based financial instrument,
which enables participation in infrastructure financing through a stable and liquid
instrument. InvITs provide an opportunity to invest in infrastructure assets with predictable
cash flows and dividends. InvITs have been introduced in India in 2014 and are employed
by infrastructure asset owners to pool in money from a diverse set of investors against
pay-out of cash flow generated by the assets on a periodic basis.
Under an InvIT transaction, infrastructure asset owners transfer multiple revenue generating
asset
38
SPVs through holdco or otherwise to a trust which then issues units to investors for
raising money. The upfront money so raised is utilized by the developers for creation of
new greenfield assets as also for repayment of debt which enables availability of capital
with lenders for investment/ lending to new projects. The investors, in lieu of invested
money, receive a share of Net Distributable Cash Flows (NDCF – similar to the dividend
pay-outs) on a periodic basis, commensurate with their unit holding in the Trust. Improved
yields for the unit holders can be insured, by adding revenue-generating projects and
expanding its portfolio.
The structure of a typical InvIT transaction and the fund flow across agencies is represented
in the figure below.
38 Potential to add under construction assets in line with SEBI regulations
24Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook Figure 15: InvIT transaction – Illustrative structure
2.6.1 Key stakeholders
Under this structure, the public asset owner (‘Sponsor’) creates an independent trust and
transfers the ownership/ rights of the public assets to the same. Investors (‘Unit Holders’)
are the beneficiaries
39
of the trust.
The key stakeholders under the InvIT structure include:
aThe Sponsor – The sponsor is the public asset owner (for public-owned assets)
which sets up the InvIT with the objective to monetise its assets. In case of
PPP projects, the sponsor is the infrastructure developer or a SPV holding the
concession agreement.
aThe Trustee – The trustee means a person who holds the InvIT assets in trust for
the benefit of the unit holders, in accordance with extant regulations.
aThe Unit holders – The unit holders are the investors who subscribe to the units
of the InvIT. The unit holders are the eventual beneficiaries of the asset.
aThe Investment manager – The investment manager is responsible for taking
investment decisions in the interest of unit holders including addition of new
assets / sale of existing assets, leverage etc.
aThe Project Manager – The project manager brings in the operational expertise
of managing the infrastructure assets as per the interest of the unit holders.
Other key stakeholders incidental to the InvIT registration and issuance process include
valuer, auditor(s), merchant banker(s), registrar & transfer agent, banks, registrar to the
issue, credit rating agencies, and depository participants.
39 As per the Indian Trust Act, 1882 – the person for whose benefit the confidence is accepted is called the
“beneficiary”
25Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook Table 8: Key Requirements/ Terms of an InvIT
Key
Requirement
— Operational Infrastructure assets, with at least one year of operations
for Public InvIT
40
— Eligible sub-sectors as per Harmonised Master list of infrastructure sub-
sectors of MoF
Types of InvIT
Public
41
Open for participation by all kinds of investors including retail; and
Private: Restricted for participation by Qualified Institutional Buyers and
bodies corporate
Minimum Value Assets under InvIT: Rs. 500 crores (Initial offer size: At least Rs 250 crore)
Consideration Upfront Consideration against subscription of InvIT units
Investor Class
Financial investors looking for stable yields; sovereign wealth funds and
global pension funds, insurance funds, retail investors etc.
Investor
Payment
Not less than 90% of the net distributable cash flows of the InvIT
distributed to unit holders
Figure 16: Key Benefits of InvIT
InvITs – Similar instruments globally
42
Globally private institutional funds have complemented debt funds in financing
infrastructure investment. There has been a global consensus on the potential for
tapping large institutional investors (including pension funds, sovereign wealth funds
etc.) as well as retail investors towards infrastructure asset class, especially with lower-
risk levels (brownfield assets). Two specific instruments seen in the USA which have
been fairly successful in tapping institutional investors into infrastructure assets are:
Yieldcos and Master Limited Partnerships (MLPs).
40 Potential to add under construction assets in line with SEBI regulations; For private InvITs non-operational
assets, subject to compliance with SEBI regulations may be considered
41 Minimum number of investors is 20; If number of participants is more than 1000, then automatically
public issue
42 The Evolution of the YieldCos Structure in the United States, Mauricio Franco Mitidieri April 13, 2020;
Sean T. Wheeler Latham & Watkins MLP Practice
26Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 2.6.2 InvIT Process
InvITs are established are trusts under the Indian Trust Act, 1882 and regulated under
the SEBI (Infrastructure Investment Trusts) Regulations, 2014. Detailed regulations are
discussed in Section 6.
The steps in a typical InvIT transaction are represented in the figure below.
Figure 17: InvIT transaction – Illustrative steps
2.6.3 InvIT transactions in India
India has seen a number of InvIT transactions over the last 4-5 years. The total Assets
Under Management (AUM) across the 8 active InvITs
43
is around Rs. ~1.4 lakh crore. Bulk of
the assets are under toll roads (rs. 47,500 crore), followed by telecom (rs. 42,000 crore),
gas pipeline (rs. 16,500 crore) and power transmission (rs. 14,000 crore).
Since the introduction of InvIT regulations, bulk of the InvIT’s have been sponsored by
private sector infrastructure developers. Recently, public sector asset owners such as
Powergrid and NHAI have initiated greater adoption of the instrument. The table below
provides the list of InvIT transactions since its introduction
Table 9: Key InvIT transactions
S.No.InvITSector
Public/
Private
Listing
month
Assets under
Management
(Rs. crore)
1 IRB InvIT Fund – IRB
Infrastructure Developers
Toll roads PublicMay 2017 6,500
2 India Grid Trust of Sterlite
Power
Transmission Public June
2017
15,000
43 Excluding the first public sector InvIT of Powergrid.
27Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook S.No.InvITSector
Public/
Private
Listing
month
Assets under
Management
(Rs. crore)
3 IndInfravit Trust – L&T IDPL Roads Private June
2018
10,500
4 India Infrastructure Trust –
Brookfield
Gas pipeline Private March
2019
14,500
5 Oriental Infra Trust – Oriental
Structural Engineering Pvt. Ltd.
Toll roads Private June
2019
11,000
6 IRB Infrastructure Trust Toll roads Private Feb
2020
22,500
7 Tower infrastructure Trust –
Reliance & Brookfield
Telecom
towers
Private Sep
2020
42,000
8 Digital Fibre Infrastructure TrustFibre Optic Private Oct
2020
1,500
9 Powergrid InvITPower
Transmission
PublicMay 2021 7,800
The first InvIT of a public sector entity, PowerGrid has been recently launched in the
market. The issue has monetised assets worth ~Rs 7,800 crore and Powergrid has divested
85% of its unit holding in the InvIT. The issue has been listed at premium. National Highways
Authority of India is also in advanced stage of raising funds through an InvIT issue expected
shortly.
CASE STUDY – INDIGRID INVIT
44
IndiGrid InvIT was established in October 2016 by Sterlite Power Grid Ventures Ltd
(SPGVL) to monetise two transmission assets – Bhopal Dhule Transmission Company
Limited (BDTCL) and Jabalpur Transmission Company Limited (JTCL). The assets have
established long term contracts, with low operating risks and stable cashflows.
IndiGrid raised around Rs. 1,012 crores from 19 anchor investors. This helped improve
retail participation in the InvIT and also ensured stable price levels.
44 Information collated based on filings in the Stock Exchanges
28Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook Key takeaways
a. Diversified Asset Mix: The Trust has a diversified asset portfolio comprising 12
inter-state transmission assets across 15 states and 1 Union Territory. These assets
have an availability-based payment mechanism, with a credible counterparty –
PGCIL with average availability of greater than 99.5% (from COD till Dec 31, 2020).
b. Addition of assets: Starting with 2 project assets with an AUM of Rs. ~3,700
crores in 2017, the InvIT currently holds around 15 project assets with an aggregate
AUM of Rs. ~15,000 crores as of Q3 2021. The increase in asset portfolio over
time has ensured greater market interest and improved liquidity of InvIT. Active
role of Investor and co-sponsor, KKR in management and Governance of InvIT
and investment decisions has played a critical in growth journey of the InvIT and
value appreciation.
c. Distribution per Unit (DPU) and Distribution yield over the period from FY 2018
to FY 2020 for InvIT is as shown below
2.7 REAL ESTATE INVESTMENT TRUST
Real estate assets are capital-intensive assets which require substantial up-fronting of
investments by the developer. While the land and building based debt products have been
available, this does not provide for effective risk-sharing and cost-effective financing for
the developer. Real Estate Investment Trusts (REIT) are similar in structure to InvITs. As
against InvIT which is unique to the Indian context, REIT structures have seen traction
across the globe. The REIT’s origin dates back to the 1960s in US. The objective of the
REIT structure is to broad-base options for the developers towards expanding the sources
of funds.
Only real estate projects
45
are eligible under this structure. The regulations also stipulate
that 51% of the consolidated revenues of the REIT, holding company and SPV, should arise
45 “Real estate” or “property” means land and any permanently attached improvements to it, whether
leasehold or freehold and includes buildings, sheds, garages, fences, fittings, fixtures, warehouses, car
parks, etc. and any other assets incidental to the ownership of real estate but does not include mortgage.
29Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook from rental, leasing and letting real estate assets or any other income incidental to the
leasing of such assets. However, exceptions have been made with respect to (i) hotels,
hospitals and convention centres forming part of composite real estate projects, whether
rent generating or income generating; and (ii) common infrastructure for composite real
estate projects, industrial parks and SEZs.
The structure of a typical REIT transaction and the fund flow across agencies is represented
in the figure below.
Sponsors
TrusteeREIT
Unit Holders
Real estate assests
Unit holders’ cashflow to REIT
Funds infused at the time of issue
REIT’ cashflow to unit holders
• Divided
• Interest on REIT loans
• Capital repayment/buyback of
units
REIT’ cashflow to unit SPVs• REIT loans for SPV loan
prepayment
• Meeting SPVs’other cash
requirements - reserve creation,
etc.
SPVs’ cashflow to REIT
• Dividdend
• Interest on REIT loans
• Repayment of REIT loans
• Share buyback of SPVs
SPVSPV(V)
Holdco
Manager
Figure 18: REIT transaction – Illustrative structure
Real Estate (Regulation and Development) Act has brought in sizeable level of accountability
and transparency in the segment. In this context, REIT structure has been able to provide
an effective and robust corporate governance framework with clearly delineated roles and
responsibilities for key stakeholders such as sponsor, investment manager, etc. and the
transparency on the revenue/ rent collections.
Table 10: Key Requirements/ Terms of an REIT
Key Requirement
Revenues arise from rental, leasing and letting real estate assets or
any other income incidental to the leasing of such assets
Mandatory Listing
Types of InvIT Public (Open for participation by all kinds of investors including retail)
Consideration Upfront Consideration against subscription of REIT units
Investor Class
Financial investors looking for stable yields; sovereign wealth funds and
global pension funds, insurance funds, retail investors etc.
Investor Payment
Not less than 90% of the net distributable cash flows of the REIT
distributed to unit holders
30Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook Potential Assets
Railway warehouses/ good sheds
Multifunctional complexes
City-side development for Airports
Commercial development on Municipal land
Commercial development along the toll road stretches
Railway stations’ commercial development etc.
Public sector entities in India sit on an inventory of under-utilised land assets in some
of the high value real estate zones, which may be freehold land or underutilised land
parcels. The REIT platform provides an opportunity to capture value from these assets
by allowing commercial development. The instrument provides an opportunity for real
estate asset owners to raise money upfront by transferring the revenue generating real
estate assets to the trust. The investors receive the net distributable cash flows generated
by the infrastructure assets.
Figure 19: Benefits and Limitations of REIT
REITs are established as trusts under the Indian Trust Act, 1882 and regulated under the
SEBI (Real Estate Investment Trusts) Regulations, 2014. Detailed regulations are discussed
in Section 6.
Issuance process of a REIT is similar to an InvIT and is discussed in detail in Section 6.
REITs – Similar instruments globally
REITs have been active infrastructure instruments for real estate financing globally.
They started in the USA in the early 1960s and currently is present across 40 countries
across the world. REITs globally invest in the majority of real estate property types,
including offices, apartment buildings, warehouses, retail centres, medical facilities,
data centres, cell towers, infrastructure and hotels.
31Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook List of countries with REITs and the year of adoption
46
Snapshot of the US REIT market:
It is estimated that there are more than 1100 REITs in US
47
, out of which 225 REITs
are public REITs registered with the SEC. As of December 2019, REITs in the US own
more than $3.5 trillion of gross real estate assets and 5.16 lakh properties
48
. REITs may
also be categorized as public REIT (in case of shares registered with Securities and
Exchange Commission) or private REITs.
REITs in US can be categorized based on nature of risk exposure to the underlying
asset as follows: Equity REITs and Mortgage REITs (mREITs). Equity REITs own and
operate real estate assets while the mREITs invest in mortgages and mortgage-
backed securities, providing financing for residential and commercial properties. REITs
performance have largely been better than the overall stock market performance.
The market capitalization of REITs (and number of publicly traded REITs in bracket)
in select countries is as follows
49
:
JurisdictionValueNumber
United StatesUS$ 1232 billion194
SingaporeUS$ 76 billion44
JapanUS$ 148 billion62
Hong KongUS$ 35 billion11
IndiaUS$ 4 billion1
MalaysiaUS$ 9 billion18
46 https://www.reit.com/investing/global-real-estate-investment
47 Based on tax return filings by Internal Revenue Service;
48 Only public REITs
49 https://www.crisil.com/content/dam/crisil/our-analysis/reports/Ratings/documents/2019/october/
indias-reit-opportunity.PDF (Aug, 2019)
32Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 2.7.1 REIT transactions in India
India has seen 3 REIT transactions since the regulations were introduced. The transactions
have been largely in the private sector space. With a significant inventory of real estate
assets with strong development potential, REITs can play a major role in transforming
public sector financing landscape. The table below provides the list of REIT transactions
since its introduction.
Table 11: REIT transactions in India
S.No. REITSector
Public/
Private
Listing
month
Assets under
Management
(Rs. crore)
1 Embassy REITOffice parks Public April 2019 33,000
2 Mindspace REIT Office parks Public Aug 2020 22,500
3 Brookfield India REIT Office parks Public Feb 2021 11,000
Total66,500
CASE STUDY – MINDSPACE REIT
50
Mindspace REIT was established on November 18, 2019. The REIT holds 10 real estate
assets through 8 SPVs. Mindspace Business Parks REIT owns office portfolio located
in four key office markets of India – Mumbai (41%), Hyderabad (39%), Pune (17%) and
Chennai (3%). Portfolio has total leasable area of 29.5 million square feet (msf) and is
one of the largest grade-A office portfolios in India. Portfolio comprises 23.0 msf of
completed area, 2.8 msf of under construction area and 3.6 msf of future dvelopment
area, as of March 31, 2020.
Key takeaways
1. Counterparty profile for the REIT assets
The tenants are largely MNC firms from diversified sectors which helped bring in better
realisations and lower volatility of cashflows. The average rent for the assets was around
Rs. 60 per sq. ft. per month. Hence, the selection of the assets for REIT needs to be backed
by adequate assessment of counterparty risks that the REIT assets might get exposed
to and also needs to be backed by risk mitigation measures to ensure investor comfort.
50 Information based on fillings in the Stock Exchanges
33Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 2. Anchor investors and strategic investors during public issue;
Presence of an experienced real estate player i.e Blackstone group in this case, with
experience in managing similar assets can potentially bring in large-scale investors like
pension funds, insurance funds etc.
2.8 FACTORS DETERMINING CHOICE OF MODEL
The key decision-making criteria for monetisation include:
i. Extent of fund raised and potential for upfront receipt for the public sector
agency
ii. Tax efficiency and liquidity for investors and target investor class
iii. Operational control for the public sector agency
iv. Valuation potential
It is seen that the capital market instruments have the potential to bring in better value
considerations, while the PPP concession may be suitable in sectors where the private
sector brings in improved standards for operation and maintenance with service to users
under a defined framework.
34Asset Monetisation— Framework and Instruments Volume I: Monetisation Guidebook 3
Asset Monetisation
Experience: India
and Beyond
The section delves into the Asset
Monetisation experience, globally
and in India, its key features,
guiding frameworks,
factors for success
and case studies
Asset Monetisation Experience: India and Beyond 35 Infrastructure investment requirement, globally, has been estimated at USD 94 trillion
during the period 2016 to 2040
51
. Of which, ~50% alone is required in Asia (with China,
India and Japan being major contributors). While governments lead the initiative of
meeting the massive infrastructure deficit, it is widely accepted that governments alone
cannot fund this level of infrastructure investment requirement. In order to bridge this
infrastructure deficit, globally public sector has explored various options including, but not
limited to public funding, private partnerships/ private finance initiatives, value capture,
debt financing and public asset recycling.
Asset recycling is considered as an alternative strategy where there is a considerable public
asset base–comprising of mature brownfield or surplus or under-utilized assets–which is
leveraged for raising upfront capital for investment in new assets or for revitalization of
existing assets. Asset recycling is being increasingly recognized as a means of alleviating
budget pressure and delivering new infrastructure and services.
It simultaneously enables private sector investors avoid risks associated with the construction
phase. There is already an established track record of investment by institutional investors
and funds in mature economic infrastructure projects such as toll roads, ports and airports
in North America, Europe and Australia. More recently, such investments have been seen
in Asia-Pacific region as well.
3.1 AUSTRALIA’S ASSET RECYCLING INITIATIVE (ARI)
The concept of asset recycling has been widely implemented in Australia through the
Asset Recycling Initiative (ARI) of the federal government.
3.1.1 Need for Asset Recycling in Australia
Australian federal government in the year 2013, directed the Productivity Commission (PC)
to commence a thorough examination of infrastructure costs and financing in Australia with
focus on ways to improve decision-making and implementation processes. The objective
was to facilitate cost reduction in public infrastructure projects and recommendations
on policy measures including any non-legislative approaches, which would help ensure
effective delivery of infrastructure services over both the short and long term.
The PC findings reported an increasing caution by private investors about investing in
public infrastructure projects owing to factors such as long drawn procurement processes
with ‘patchy’ deal flow. At the same time, owing to a federal structure, it is the states and
local governments that had much of the planning, environmental and regulatory controls.
In this backdrop, the government, during the 2014-15 budget, announced the Infrastructure
Growth Package (IGP) which was s a ten-year vision of infrastructure investment in the
country. IGP comprised of three key components, the Asset Recycling Initiative, new
investments, and the Western Sydney Infrastructure Plan. The Asset Recycling Initiative
(ARI, 2014) which was aimed at encouraging states to recycle assets and utilise the
sale proceeds into new productivity-enhancing infrastructure by encouraging private
companies to fund and run public infrastructure.
51 Global Infrastructure Outlook 2017 published by Oxford Economics
36Asset Monetisation Experience: India and Beyond Volume I: Monetisation Guidebook 3.1.2 Key features of Asset Recycling Initiative (ARI)
The ARI provided monetary incentive for states to engage in asset recycling to boost
infrastructure development. It envisaged a sum of 15 percent of the estimated proceeds
from monetisation of an asset (through sale or lease) to be paid to a state by the federal
government if the proceeds are reinvested in new infrastructure. The ARI was designed as
a five-year program from 2014- 2019, and the funding was allocated to specific proposals
on a first-come, first-serve basis.
States, in agreement with the federal government, decided on the specific assets to
be monetised and on the additional infrastructure that money will be recycled into.
The initiative also envisaged a definite timeline for completion of sale of the asset and
commencement of construction of the additional infrastructure. The federal government’s
financial contribution was managed through the Asset Recycling Fund (ARF), which was
used to make payments to states under the IGP.
Figure 20: Illustrative ARI process
3.1.3 Assets covered under ARI and Investor response
Overall, three of Australia’s eight states and territories participated in the scheme. By
2018, 12 major public assets were rolled out under ARI across New South Wales, Victoria,
the Northern Territory, South Australia and the Australian Capital Territory. Approximately,
AUD 3 billion in incentive payments were paid to participating states and territories over
the life of the scheme. This helped in unlocking over USD 17 billion in new infrastructure
development across Australia. The initiative helped in enhanced investments on new
transportation infrastructure by states through sale or lease of assets. Asset classes such
as ports, electricity generation, transmission and distribution and roads were leased / sold.
Assets such as land title offices, lottery offices and dilapidated public housing were also
taken up with governments, redeploying the money into new infrastructure in partnership
with the private sector.
37Asset Monetisation Experience: India and Beyond Volume I: Monetisation Guidebook Figure 21: Major public assets monetised under the ARI
52
Figure 22: Notable investors participating in Australia’s Asset Recycling Initiative
53
52 Values in million Australian dollars – Source: Australian Asset Recycling Initiative website
53 Values in million Australian dollars – Source: Australian Asset Recycling Initiative website
38Asset Monetisation Experience: India and Beyond Volume I: Monetisation Guidebook CASE STUDY – PORT OF MELBOURNE
The Port of Melbourne occupies 510 hectares of land to the west and south west
of the Melbourne CBD, spanning both banks of the Yarra River from Bolte Bridge
to the river mouth. It handles around one-third of Australia’s container trade, with
operations generating total economic benefits worth approximately AUD 7.5 billion to
the national economy. During 2018-19, around 3 million twenty-foot-equivalent units
(TEU) of containers were handled by the port ( equivalent to 75 million revenue tonnes).
According to Port of Melbourne’s 2050 ‘Port Development Strategy’ released in 2019
the total container trade volumes have been forecasted to grow by 3.5% per annum
over the long term (from 3 million TEU in 2019 to around 8.9 million TEU by 2050).
The port, previously operated as a Victorian Government entity. However, in 2016,
under the Asset Recycling Initiative, a 50-year lease of the port was awarded by the
Victorian Government to a private consortium comprising Future Fund, QIC, OMERS
and Global Infrastructure Partners (GIP), for around AUD 9.7 billion. One of the key
considerations for the lease structure was maintaining and enhancing the Port of
Melbourne’s competitiveness and efficiency particularly given the critical role that the
port plays in import and export markets.
Port of Melbourne operates within a landlord model and is responsible for asset
maintenance, assessment and repair. Port operations are carried out by third party
operators and service providers. These include stevedores, provedores, pilotage, towage
and mooring services, and services relating to shipping operations. Additionally, in
order to ensure alignment with growth projections, the port has undertaken investment
in on-port rail infrastructure to reduce dependence on road transport in the freight
supply chain. It has undertaken community engagement activities and comprehensive
environmental compliance activities that protect and enhance land and marine zones
within the port’s surroundings.
Key Takeaways:
aPort’s trade-based tariff increases set under a stable, transparent regulatory
regime and monitored by an external independent body, provide high pricing
certainty to the port and users;
aPort also secured long-term lease agreements, which provide unregulated
and stable cash flow of around one-third of total revenue. Most leases entailed
fixed increase at greater of CPI+1.5% or 4.0%; and
aContinued investment by state in supporting transportation infrastructure
such as rail link help in improving the port’s connectivity and competitiveness
39Asset Monetisation Experience: India and Beyond Volume I: Monetisation Guidebook 3.1.4 Key takeaways from ARI
Consensus of state and federal government over asset sale/lease: A formal consensus
mechanism for sale/lease of assets under the ARI was ensured between the federal and
state government.
As per the framework of the ARI scheme, the state government recommends the assets
to federal government and post approval, the asset can be brought under the ambit of
the ARI scheme.
Timebound scheme for funding: In order to ensure timeliness and to encourage
competition, the Asset Recycling Initiative window had been open for a limited period
of two years and was operated on a first come, first serve basis. Further, the bonus was
contingent upon states and territories selling and building at the same time.
Incentives to state governments: The federal government provided an additional incentive
payment aggregating to 15% of the proceeds received by the state from sale/lease of
assets. This further encouraged state government to participate in the scheme and ensure
holistic development of the country as a whole.
Commitment to invest in new infrastructure projects: Even prior to inclusion of asset
under ARI scheme, the state government is required to commit itself to invest the proceeds
in development of new infrastructure thus ensuring transparency in transaction.
3.2 INDONESIA’S LIMITED CONCESSION SCHEME (LCS)
3.2.1 Background
Government of Indonesia has recently introduced a new form of concession, i.e. Limited
Concession Scheme (“LCS”) as an alternative to the existing Public-Private Partnership
(PPP) scheme
54
.
In order to improve connectivity between its vast regions and to ensure economic growth,
Indonesia requires significant quantum of infrastructure financing. In February 2020, the
Government of Indonesia enacted an enabling regulation (Presidential Regulation No. 32 of
2020) on Infrastructure Financing through Limited Concession Rights which introduced an
alternative scheme for financing public infrastructure through utilization of existing assets,
currently being operated by the central government and/or state-owned enterprises.
3.2.2 Features of the LCS scheme
Under the LCS scheme, the private sector is proposed to be invited to operate, maintain and
expand existing assets in return for the private sector paying the government an upfront
concession fee or instituting ongoing revenue sharing schemes with the government.
These additional revenues are aimed at enabling the government to complete its massive
infrastructure programme, in particular to fund economically important, but sub-financial
54 As stipulated under Presidential Regulation No. 32/2020 on Financing of Infrastructure through Limited
Right of Utilization
40Asset Monetisation Experience: India and Beyond Volume I: Monetisation Guidebook projects, such as the Trans Sumatra Highway, as well as social infrastructure projects in
less-developed regions of Indonesia.
Eligible Infracstructure SecorsKey terms and conditions
!Transportation,
!Urban utility systems
!Telecommunication
!Electricity, Oil, Gas, Renewable
Energy
!Payment of compensation/
Up-front payment
!Amount of up-front payment
must be formulated as
owner’s estimate by the entity
undertaking LCS
!Prior to transaction, to
predetermine on how it will
reinvest the up-front payment
!Strong emphasis on hand-
back of assets
Key Criterion for assets under LCS
!Commercial operations of 2+ years
!Requires an increase efficiency of
operation
!Remaining life of assets for 10+
years
Figure 23: Key features of Indonesia’s LCS initiative
Through this regulation, private sector (including, limited liability company and foreign
business entity) will be allowed to manage and operate existing infrastructure assets,
which consist of infrastructure, namely: transportation (seaports, airports, railways and
bus terminals), toll roads, water resources, sewerage and waste management systems,
telecommunications, power plants, renewable energy, oil & gas (“LCS Assets”).
To qualify as LCS Assets, infrastructure should have been in operation for at least two
years, and the remaining life of the assets must be at least ten years. LCS Assets will be put
on list and announced to public by KPPIP, an ad-hoc committee set up by the government
to accelerate development of priority infrastructure projects in Indonesia.
Aside from benefitting from the operation of a commercial asset, private sectors
participating in LCS will also partake in the financing of new infrastructures. Private sectors
will be required to pay a premium to compensate the state or state-owned enterprises for
the grant of the limited concession. This way, the government or state-owned enterprises
are able to deploy funding for development of new infrastructure assets.
3.2.3 Benefits to the public asset owners
The scheme is expected to become an alternative funding source for infrastructure
development projects. With LCS model, the government can recycle existing operational
infrastructure assets to capitalize new development or upgrade other assets, using the
upfront money from private sector.
41Asset Monetisation Experience: India and Beyond Volume I: Monetisation Guidebook In return, the private sector is granted a concession to operate LCS Assets for certain
period of time to guarantee its return of investment. Private sector partner is proposed to
be selected through a prequalifying tender organized by the relevant authorized institution
responsible for each asset. The tender is designed to be based on the estimated value of
the upfront fee to be determined by the state’s valuer or by a qualified asset valuation
company.
The private sector granted with concession will be required to transfer the upfront fee
within 6 months after the execution of LCS agreement. Upon transfer of the asset, private
sector shall be fully responsible for the operation and maintenance of the asset, including
paying applicable tax associated with the asset.
3.3 REITS IN NON-TRADITIONAL REAL ESTATE SECTORS
Globally REIT markets have seen immense growth in recent times. The cumulative market
capitalization of REITs globally is believed to be around the USD 2 trillion level. While
USA is the largest and the oldest REIT market, the market is increasingly becoming more
global. Today, over 35 countries and regions around the world have a REIT regime in
place. Globally, 15 of the 30 largest listed real estate companies in the world are REITs,
which includes 13 U.S. REITs.
Most REITs globally operate along a straightforward business model that is by leasing
space and earning rental / leasing income on the underlying real estate, which is then
paid out to shareholders in the form of dividends. REITs typically must pay out at least
90 % of their taxable income to shareholders. The key value proposition of REITs is that
they provide all investors the chance to own valuable real estate, with an opportunity to
access dividend-based income and returns, without actually having to go out and buy,
manage or finance property.
REITs invest in a wide scope of real estate property types, including offices, apartment
buildings, warehouses, retail centres, medical facilities, data centres, cell towers,
infrastructure and hotels. Most REITs focus on a particular property type, but some
hold multiples types of properties in their portfolios. The U.S. REIT market has been
fundamentally transformed over the last three decades on the back of growth of non-
traditional real estate sectors. Newer property types, such as self-storage, health care,
cell towers, and data centres now comprise over half of the total U.S. REIT market
capitalization. These non-traditional sectors in the mature U.S. and European markets
are expected to bring the next wave of growth and the emergence of listed real estate
sectors in high-growth Asian markets.
Emerging non-traditional sectors are now being structured in the U.K. and Europe where
so far, the listed market was dominated by traditional sectors.
42Asset Monetisation Experience: India and Beyond Volume I: Monetisation Guidebook Concept: Industrial REITs
Industrial real estate investment trusts are a specialised category of REITs that invest in
industrial real estate properties which are occupied by facilities for manufacturing,
production of goods and for storage, distribution such as warehouses etc. Such
properties may either be standalone buildings or a cluster of same, whether in form of
industrial parks or otherwise. Industrial REITs may also own the land on which these
properties are developed. Industrial REITs, own and manage these properties, and lease
it out to businesses/ industrial consumers.
Industrial REITs provide investors a stable and liquid way to invest in the real estate
sector without building or purchasing industrial buildings on their own. Similar to other
REITs, these are primarily trust based investment vehicles that pool capital from various
financial investors including equity funds, institutional investors, retail investors. Capital
pooled from the investors is deployed to fund and own the industrial real estate assets,
which are then leased out to one or multiple tenants. income from tenancy of such
assets is used to provide a stable return to the investors in the REITs. These returns are
in form of dividend on holding/units which are periodically paid to investors. Further,
the unit holders also receive return by way of capital appreciation on the underlying
property.
As in case of REITs and InvITs in India, 90% of the income is expected to be paid to unit
holders. Further, subject to compliance of stipulated requirements, profits from
Industrial REITs are tax exempt.
Distribution centres and warehouses, which are collectively refers to as "logistics" real
estate are some of the biggest industrial REITs on NYSE. Given the growth in
e-commerce industry over the past few years, one of the biggest beneficiaries of the
growth in investment and capital deployment of industrial REITs have been
warehousing facilities, distribution and other storage facilities. Also, with demand for
storage and logistics rising on account of e-commerce, investors are guaranteed of
of-take and income in investments, thereby ensuring attractiveness of instruments to
all kinds of investors.
Benefits of Industrial REITs:
1. Flexible structure
Industrial REITs are structurally and regulatorily flexible to meet the demands in an
economic cycle. As against residential and commercial properties which are built
specific to customer requirements, Industrial REITs, can be customized to diferent
uses.
2. Lower Capital Expenditure
Industrial REITs are set up outside the heart of the cities and away from central business
districts which is mostly due to the need to ensure ease of inter-city movements and
accessibility of transportation. The acquisition costs for such properties are, hence,
43Asset Monetisation Experience: India and Beyond
Volum e I: Monetisation Guidebook
much lower thereby ensuring lower capital expenditure with stable return on investments.
Potential for investments in India
Given the availability of seasoned industrial parks and public sector assets of:
a. Warehousing corporations such as central warehousing corporation etc;
b. Industrial corporations;
c. Warehouses, silos and other such facilities etc
Concepts of Industrial REITs can be availed for leveraging private investment in such
public sector assets for monetisation. Industrial real estate investment trusts are a specialised category of REITs that invest in
industrial real estate properties which are occupied by facilities for manufacturing,
production of goods and for storage, distribution such as warehouses etc. Such
properties may either be standalone buildings or a cluster of same, whether in form of
industrial parks or otherwise. Industrial REITs may also own the land on which these
properties are developed. Industrial REITs, own and manage these properties, and lease
it out to businesses/ industrial consumers.
Industrial REITs provide investors a stable and liquid way to invest in the real estate
sector without building or purchasing industrial buildings on their own. Similar to other
REITs, these are primarily trust based investment vehicles that pool capital from various
financial investors including equity funds, institutional investors, retail investors. Capital
pooled from the investors is deployed to fund and own the industrial real estate assets,
which are then leased out to one or multiple tenants. income from tenancy of such
assets is used to provide a stable return to the investors in the REITs. These returns are
in form of dividend on holding/units which are periodically paid to investors. Further,
the unit holders also receive return by way of capital appreciation on the underlying
property.
As in case of REITs and InvITs in India, 90% of the income is expected to be paid to unit
holders. Further, subject to compliance of stipulated requirements, profits from
Industrial REITs are tax exempt.
Distribution centres and warehouses, which are collectively refers to as "logistics" real
estate are some of the biggest industrial REITs on NYSE. Given the growth in
e-commerce industry over the past few years, one of the biggest beneficiaries of the
growth in investment and capital deployment of industrial REITs have been
warehousing facilities, distribution and other storage facilities. Also, with demand for
storage and logistics rising on account of e-commerce, investors are guaranteed of
of-take and income in investments, thereby ensuring attractiveness of instruments to
all kinds of investors.
Benefits of Industrial REITs:
1. Flexible structure
Industrial REITs are structurally and regulatorily flexible to meet the demands in an
economic cycle. As against residential and commercial properties which are built
specific to customer requirements, Industrial REITs, can be customized to diferent
uses.
2. Lower Capital Expenditure
Industrial REITs are set up outside the heart of the cities and away from central business
districts which is mostly due to the need to ensure ease of inter-city movements and
accessibility of transportation. The acquisition costs for such properties are, hence,
In 2005-06, 157-mile Indiana East West Toll Road connecting the Chica go Skyway to the
Ohio Turnpik e was monetise d with a view to fund 10-year plan for building and fixing roads
throughout the state. The project was structur ed as a 75-year concession for managing
and operating the road and collecting tolls from motorists against an upfront consider ation
and the road remained owned by the state.
On June 29, 2006 the Indiana Toll Road Concession Company—a joint venture
road compan y—was awarded the right to operate the road for 75 years. The consortium
won the contract with a winning bid of USD 3.8 billion upfront payment. The concession
helpe d in financing the entire Indiana state’s road asset management plan for a period
of 10 years.
While project has been a windfall for the asset owners and the state of Indian a,
the project’s toll revenues sufered from 2008 recession impacting the project’s
debt serviceability in the mediu m term.
During 2014, the concessionaire ITR Concession Co LLC filed for bankruptcy and
the project subsequently induct ed a new investor and management also allowing
the creditors dues to be settled through the bankruptcy process. The toll road
is since being operated by Australia’s IFM Investors to operate the project for
the next 66 years.
Australia has an established track record in privatising large state-owned infrastructur e
transac tion involving 99 year lease of New South Wales electricity distributio n compa ny
44Asset Monetisation Experience: India and Beyond
Volume I: Monetisation Guide book
much lower thereby ensuring lower capital expenditure with stable return on
investments.
Potential for investments in India
Given the availability of seasoned industrial parks and public sector assets of:
a. Warehousing corporations such as central warehousing corporation etc;
b. Industrial corporations;
c. Warehouses, silos and other such facilities etc
Concepts of Industrial REITs can be availed for leveraging private investment in such
public sector assets for monetisation. TransGrid with the acquisition by a consortium of Pension and Infrastructur e funds for a
financing consider ation of AUD 10.3 billion. The consortium members are Hastings Funds
Management, the ASX-listed Spark Infrastructure, the Abu Dhabi Investment Authority,
Canada’ s Caisse de Dep ot et Placemen t du Que bec (CDPQ), and W ren House, part of the
Kuwait Investmen t Authority .
Hastings and its consortium partne rs reached financial close on the acquisitio n in December
2016, which comprise d AUD 5.8 billion debt and AUD 4.4 billion equity. TransGrid remains
a one of a kind since a number of factors led to the fierce competition during the bid.
TransGrid is the most treasured of the three transmis sion and distributio n companies to be
privatised in New South Wales, probably helped push bids higher than the AUD 9 billion
price tag that was estimated.
TransGrid is an example of monet isation of regula ted assets where network
prices are set by the regulator under the applicable National Electricity Law and
National Electricity Rules in the jurisdic tion.
TransGrid deal goes to show that the international bank market has sufcient
depth to finance the acquisition of even the largest infrastructure projects
in Australia showing an
jurisdictions.
National security implic ations were a critical consider ation for the asset owners
and hence stringent safegua rds were imposed on acquisit ions citing Transgrid
as critical infrastructu re. These include that Transgrid’s operation and control
be under taken solely from Australia and that foreign consor tium member s retain
an interest of no more than 50 per cent. Half of Transgrid’s board–including an
indepen dent chair and director–mus t be Australian citizens and residents.
45Asset Monetisation Experience: India and Beyond
Volum e I: Monetisation Guidebook Preparatory
Stage
4
The section provides an overview of the
preparatory actions by public sector entities
towards undertaking asset monetisation.
It starts with a general guidance
on the process towards asset
identification and methods of
monetisation, followed by
internal administrative
actions for formulation,
appraisal, and
approval process
(Preparatory
Stage).
Guidance
and
internal
administrative
framework for rolling
out the transactions
and completing the
asset monetisation process
(Transaction Stage) has been
covered as part of the next Section.
Preparatory Stage 47 4.1 OVERVIEW
The asset monetisation process needs to be seen as a sustainable strategy towards
improving infrastructure delivery and strengthening the public sector balance sheet.
Towards this, the public sector entity needs to institutionalise an efficient and effective
framework for creating a marketable and sustainable asset monetisation plan. The public
sector agencies need to follow a structured process along the following lines for the
Preparatory stage:
1. Step 1 – Preparation of an asset monetisation and financing plan
2. Step 2 – Asset screening and packaging
3. Step 3 – Transaction preparation and structuring
4. Step 4 – Approval process
At the end of the Preparatory stage, the public sector agency would have a ‘transaction-
ready’ asset for monetisation. An overview of the steps is shown in the figure below.
The preparatory actions identified herein are recommendatory in nature based on globally
witnessed best practices in asset monetisation process. However, it is prudent that the
public sector agency imbibes the learnings from each of the steps to ensure better service
delivery, and improved realizations from asset monetisation.
Figure 24: Process roadmap
4.2 STEP 1 – PREPARATION OF ASSET MONETISATION AND
FINANCING PLAN
The investment and financing plan would serve as overall guidance factors for the public
sector agency to determine the scale of asset monetisation to be embarked upon over
the medium term.
48Preparatory Stage Volume I: Monetisation Guidebook Figure 25: Sectorial investment and financing plan – Illustrative steps
55
The proposed plan should ideally cover the following areas:
Capital investment plan and project pipeline – The infrastructure gap is estimated
based on the gap between the existing infrastructure expenditure levels and expenditure
envisaged under the overall vision. The ministry/sector shall prepare a medium-term
capital investment plan aimed at bridging the gap while laying out the pipeline of projects
required to achieve the same. The capex estimates for projects shall be estimated based
on a normative approach. For the purposes of next four year period investment plan under
NIP should be treated as the pipeline.
Financing plan and scale of asset monetisation – The public sector entity may prepare
a financing plan for meeting the investment cost as laid out under the capital investment
plan or even otherwise detail an asset monetisation plan to be self-sufficient and diversify
its funding sources. The financing plan is to be prepared based on a review of the financial
position of the public sector agency combined with a reasonable estimate on the central/
state grants over the medium-term. The gap in financing from the available sources of funds
including grants/ debt (across multiple sources) and own funds, needs to be identified.
The step helps quantify the scale of financing gap to be met through asset monetisation
and help line ministries formulate a phasing plan for the same.
By end of this step, the public sector entity is expected to have a clear understanding of
the scale of funds to be mobilized through asset monetisation over the medium term viz.
over the next 5-10 years. Further, the monetisation plan of a public asset owner should
be seen not just in light of its own funding gap, but of the overall ministry/ department.
4.3 STEP 2 – ASSET SCREENING AND PACKAGING
In this step the public sector entity will identify the assets to be monetised to meet the
objectives identified in Step 1 above.
Identification of the right assets for monetisation is a multi-layered decision making task.
It involves the perspectives of key stakeholders – Government/ public sector agency,
investors, development and operation partners, private sector ecosystem including
developers, operators, tertiary material suppliers, monitoring agency and users, etc. – to
be imbibed into the asset identification process. As a near term measure, a compendium
55 To be undertaken at the overall ministry/sectoral level
49Preparatory Stage Volume I: Monetisation Guidebook of asset-level information reflecting key operating, financing and profitability parameters
can be maintained for internal use by concerned line ministries.
4.4 STEP 3 – TRANSACTION STRUCTURING
The Steps 1 and 2 above represent prudent actions which may be initiated by the public
sector agency for arriving at a shortlist of assets for monetisation and phasing. At the end
of step 2, a prioritised list of assets for monetisation and the method of monetisation would
be ready. This Step 3 starts with the selection of one of the assets from the prioritised list
and initiating the preparatory actions towards transaction.
Before initiating the transaction process, the public entity may need to undertake feasibility
studies for monetisation. This stage covers project preparation (including techno-economic
feasibility, valuation analysis), project structuring, preparation of standard contractual
documents and obtaining of project clearances etc. The typical steps in the project
structuring are shown in figure below.
Figure 26: Steps in project structuring
50Preparatory Stage Volume I: Monetisation Guidebook The detailed studies are aimed at exploring the project boundaries, technical configuration
and feasibility, demand projections and financial feasibility, review of policy/ legal/
regulatory environment, and the value-for-money and affordability considerations. The
scale of the studies varies based on the complexity of the proposed transaction.
aIn case of monetisation of existing brownfield assets with limited capex
requirement, the studies may focus more on the financial assessment, followed
by risk assessment and mitigation measures for effective O&M. This is typically
useful in case of capital market instruments like InvIT and REIT models.
aIn case of transactions which require substantial capex, detailed project preparation
documents to ensure feasibility of the project proposal has to be done.
This will help structure the projects so that the risks are properly allocated between public
and private sector. The project structuring and risk allocation is an important input to the
preparation of contract documents.
The project structuring process needs to be supported by experienced transaction
advisors with an established track record in undertaking project feasibility and structuring
transactions.
Work that will be undertaken by the transaction advisors include cost and viability analysis,
valuation analysis (of applicable), stakeholder consultation, etc. Further the consultants
will submit a transaction advisory report based on which the public sector enterprises
will internally decide on going ahead with the transaction.
At the end of this step, the public sector agency would have prepared all the project
documents related to the transaction including the backup studies and bid documents
etc. The public sector agency thereafter needs to prepare the “project proposal” in the
appropriate format depending on the category and value of transaction. Guidance/
recommendation in this regard is as provided in following sub-section. The proposal will
summarise the key observations and will be submitted to nodal authorities for approval.
Figure 27: End to End Process for Project Preparation
4.5 STEP 4 – APPROVAL/ SANCTION
Under this step, the public sector agency submits the project proposal to the competent/
nodal authority for approval/ sanction.
In case of central sector agencies, the approval process has been established under the
“Guidelines for Formulation, Appraisal and Approval of Central Sector Public Private
Partnership Projects, 2013”. The appraisal/approval process is a two stage process with in-
principle approval prior to issue of RFQ and final recommendation of PPPAC for approval
of competent authority prior to receipt of financial bids. In cases where the PPP project is
51Preparatory Stage Volume I: Monetisation Guidebook based on a duly approved Model Concession Agreement (MCA), ‘in principle’ clearance by
the PPP Appraisal Committee (PPPAC) may not be necessary. In such cases, final approval
of the PPP Appraisal Committee may be obtained before inviting financial bids
Further, some states like Gujarat and Tamil Nadu have established a separate agency
towards handholding line ministries as well as grant the necessary approval for undertaking
PPP projects. In other cases, it is largely under the purview of the line ministries.
Further, for non-PPP based monetisation models, Department of Investment and Public
Asset Management (DIPAM) has laid down detailed procedures and mechanisms for
Central Public Sector Enterprises (CPSEs) / Public Sector Undertakings (PSUs) / Other
Government organizations etc.
56
, however, this is primarily focused on non-core assets with
provision for adoption for core assets through Competent Authority approval.
56 https://www.dipam.gov.in/dipam/dipam_docs/assetMonetisation/Asset%20Monetisation%20
Procedure%20and%20Mechanism_0.pdf
52Preparatory Stage Volume I: Monetisation Guidebook Transaction
Stage
5
The section provides an overview
of the steps involved in the
Transaction Stage and the
regulatory and institutional
structure covering
each of the asset
monetisation
instruments
This
section
provides
and overview
of the asset
monetisation
processes across the
key instruments identified.
It covers the regulatory
environment towards, the key
institutional stakeholders, the
documentations involved and the actual
steps in the asset monetisation process for
each instrument.
Transaction Stage 53 5.1 INVIT – REGULATORY FRAMEWORK AND PROCESS
5.1.1 Regulatory framework and Institutional stakeholders
Regulatory framework
InvITs are independent trusts registered under the Indian Trust Act, 1882. The regulatory
framework for an InvIT issuance is guided by the SEBI (Infrastructure Investment Trusts)
Regulations, 2014 (as updated/amended from time to time)
57
.
As discussed in Section 2, the key stakeholders with respect to InvIT include the sponsor
(usually the asset owner), unit holders (usually the private sector investors), the trustee
(one who holds the InvIT assets in trust for the benefit of the unit holders), and project
managers (usually developers/ asset managers and may be private sector/ public sector
entities) and investment manager (responsible for adding assets to the InvIT / divesting
assets from the InvIT / other financing decisions related to the InvIT). The SEBI (InvIT)
Regulations, 2014 primarily provide for:
Figure 28: Elements of SEBI InvIT Regulations
Other sections covered include inspection process, procedures for action in case of default,
and other miscellaneous actions.
Table 12: Salient features of SEBI InvIT Regulations 2014
HeadRemarks
Sponsor–
Eligibility
Minimum net worth: Rs. 100 crores;
At least 5 years of experience as developer and two projects
completed
Mode of
Placement
Private Placement
Public Listing
SPV
shareholding
InvIT must hold at least 51% stake in the Project SPV
57 The consolidated amended regulations is as provided on SEBI website.
54Transaction Stage Volume I: Monetisation Guidebook Investment
Value of InvIT assets: Minimum Rs. 500 crores
Initial offer size of InvIT: At least § 250 crore.
For Public Placement:
� Not less than 80% of InvIT value to be invested in “completed and
revenue generating projects” in eligible infrastructure projects (directly
or through Holdco)
For Private Placement:
� Not less than 80% in eligible projects
58
Holding Period
An InvIT shall hold an infrastructure asset for a period of not less than
three years from the date of purchase of such asset by the InvIT
Payment to unit
holders
Not less than 90% of net distributable cash flows of the SPV
distributed to the InvIT;
Not less than 90% of net distributable cash flows of the InvIT
distributed to unit holders;
Distribution at least twice in a year
Borrowings
A listed InvIT may issue debt securities as long as the consolidated
borrowings and deferred payments (of InvIT, Holdco and SPV), net of
cash and cash equivalents does not exceed 70% of the asset value
In case of aggregate borrowings and deferred payment exceeding 49%,
the InvIT has to be rated AAA
Other guidelines, circulars, rules of SEBI, RBI related to InvIT are as provided in Annexure 1.
Institutional stakeholders
Sponsor
The sponsor is the entity that sets up the InvIT. In case of traditional
procurement route, the public sector agency is usually designated as the
sponsor and in case of PPP, the private sector developer/project SPV
holding the concession agreement is the sponsor.
Trustee
A trustee is an entity holding the InvIT assets for the benefit of the
unitholders and is registered with SEBI under the Securities and Exchange
Board of India (Debenture Trustees) Regulations, 1993. The activities of the
trustee are regulated under a formal “Trust deed” entered to between the
Sponsor, InvIT and the trustee laying out the roles and responsibilities of
each members of the trust
Investment
Manager
This entity is responsible for the management of assets and investments
of the InvIT. The role of the investment manager is detailed under Section
10 of the SEBI InvIT Regulations 2014. Key responsibilities include: (i)
investment decisions with respect to the underlying assets or projects of
the InvIT including any further investment or divestment of the assets (ii)
oversee activities of the project manager with respect to compliance to the
relevant agreements (iii) work with the merchant banker and the trustee in
the issuance related documentations (iv) ensure investments of InvIT are in
accordance with the guidelines. The investment manager needs to have a
net worth of at least Rs. 10 crore and an experience in fund management
and advisory services of at least 5 years to be eligible.
58 Eligible Projects means In non-PPP projects, the infrastructure project has received all requisite approvals
for commencement of construction In PPP projects, the project has achieved commercial operations
with one-year track record, or are in pre-COD stage
55Transaction Stage Volume I: Monetisation Guidebook Project Manager
This entity brings in the necessary technical expertise for better
management of assets. The project manager shall undertake operations
and management of the InvIT assets including making arrangements for the
appropriate maintenance, either directly or through the appointment and
supervision of appropriate agents. The activities of the project manager
are regulated under a “project implementation agreement” or “project
management agreement”. This agreement is between the project manager,
the concessionaire SPV, and the trustee which sets out obligations of the
project manager with respect to execution of the project.
Other key stakeholders incidental to the InvIT registration and issuance process include
Valuer, Auditor(s), Merchant banker(s), Registrar & Transfer agent, Banks, Registrar to the
issue, Credit rating agencies, and depository participants.
5.1.2 Issuance Process
The steps in issuance depends on the whether the sponsor envisages to undertake the
InvIT issue through private placement or public issue (depending on the number of unit
holders offered to). In case of public issue, the issue of units maybe through the following
methods: initial public offer (IPO), or follow-on public offer (FPO) or any other issue made
to the public as maybe specified. Brief description of the issuance process is as follows:
Selection of assets to be put under InviT
Establishment of Infrastructure Investment trust under the Investment trust act
Engagement of merchant banker
Finalisation of other key stakeholders including trustee, project manager
Registration of InviT with Sebi
Decision on private vs public issue - Depends on size of issuance etc.
Structuring the transaction
Completion of transfer of asset
Completion of other transaction documentation including Investment
management, project management agreement
Pre- Issuance process
Issuance process and allotment of units
Listing process
Figure 29: Step by Step Issuance Process
56Transaction Stage Volume I: Monetisation Guidebook 5.2 REIT – REGULATORY FRAMEWORK AND MONETISATION
PROCESS
5.2.1 Regulatory framework and Institutional stakeholders
Regulatory framework
The regulatory framework for an REIT issuance is guided by the SEBI (Real Estate
Investment Trusts) Regulations, 2014. REITs, like InvITs, are registered are independent
trusts under the Indian Trust Act, 1882.
The regulatory/ institutional structure is largely similar to that of InvITs except for key
differentiations in – Class of assets, eligibility/investment conditions under SEBI (REIT)
Regulations, 2014 and a common intermediary for management of assets and investment
viz. Manager (as against separate investment and project manager under InvIT – among
others.
Such key regulatory/institutional aspects (which are different from InvIT) are as highlighted
herein
Table 13: Salient features of SEBI REIT Regulations 2014
HeadRemarks
Sponsor–
Eligibility
Each sponsor to hold not less than five per cent. of the number of units
of REIT on post-initial offer basis
Minimum net worth of Rs. 100 crores, on a collective basis;
— Each sponsor should have at least Rs. 20 crores of net worth
At least 5 years of experience as developer and two projects completed
Investment/
Asset
Not less than 80% of REIT value has to be invested in “completed and
rent/ income generating properties” (directly or through Holdco)
No more than 20% of REIT value may be invested in under-construction
projects
59
/ debt securities/ equity investment in real estate companies/
government securities/ money-market instrument/ Transfer of
Development rights acquired for utilization in a particular project/
unutilised Floor-Space-Index (FSI)
Not less than 51% of the consolidated revenues of the REIT, Holdco and
SPV
60
shall be from rental, leasing and letting real estate assets or any
other income incidental to the leasing of such assets.
Borrowings
A listed REIT may issue debt securities as long as the consolidated
borrowings and deferred payments [of REIT, Holdco and SPV], net of
cash and cash equivalents does not exceed 49% of the asset value
In case of borrowings + deferred payment exceeding 25%, the REIT has
to be rated AAA
59 Subject to conditions
60 Excluding gains arising from disposal of properties,
57Transaction Stage Volume I: Monetisation Guidebook Other guidelines, circulars, rules of SEBI, RBI related to InvIT are as provided in the
Annexure.
Institutional stakeholders
SPV is the entity which holds the controlling stake (51% or higher) either directly or indirectly
(through a holding company). It may be registered as a company (under Companies Act,
2013) or as (LLPs). The SPV should hold at least 80% of its assets directly in properties.
Sponsor – The sponsor is the entity that sets up the REIT and transfers its assets to the
same. The sponsor may choose to transfer the entire shareholding or interest/ rights to
the SPV. The sponsor may also sell its stake in the units to another party, who will be “re-
designated sponsor” for the REIT. However, such sales can happen only after a period of
three years from the date of listing.
Manager is responsible for the management of assets and investments of the REIT. The
role of the manager is detailed under Section 10 of the SEBI REIT Regulations 2014. Key
responsibilities include: (i) investment decisions with respect to the underlying assets
of the REIT including any further investment or divestment of the assets (ii) undertake
management of REIT assets including lease management, maintenance of the asset, regular
structural audits, regular safety audits etc. either directly or through the appointment and
supervision of appropriate agents (iii) work with the merchant banker and the trustee in
the issuance related documentations (iv) ensure investments of REIT are in accordance
with the guidelines.
The manager needs to have a net worth of at least Rs. 10 crore and an experience in fund
management and advisory services of at least 5 years
61
to be eligible. The activities of the
manager are regulated under an “investment management agreement” . This agreement
is between the trustee and the manager which lays down the roles and responsibilities of
the investment manager towards the REIT.
5.2.2 Issuance Process
As detailed in Section 2, the public sector agencies shall identify the asset and get the
necessary internal approvals for initiating asset monetisation. Brief description of the
issuance process is as follows:
i. Selection of properties to be put under the REIT – This step involves the sponsor to
identify the key properties for asset monetisation. The contours of the properties
need to be clearly defined so as to meet the objectives as laid out under the
REIT regulations. At least 80 percent of the REIT assets need to be invested in
“completed and rent/ income generating properties”.
ii. Establishment of Real Estate Investment trust under the Indian Trust Act – The
sponsor shall establish the Real Estate Investment Trust as per the provisions of
Indian Trust Act, 1882.
61 Further, at least 2 of the key personnel of the manager should have an experience of 5 years or above in
fund management and advisory
58Transaction Stage Volume I: Monetisation Guidebook iii. Engagement of merchant banker – The merchant banker plays a critical role as a
financial intermediary in the REIT issuance. Merchant bankers are registered with
SEBI and are regulated under the SEBI (Merchant Bankers) Regulations, 1992.
iv. Finalization of other key stakeholders – Trustee, and Manager – The next step in
the issuance process is the finalization of the trustee, and the manager. The roles
and responsibilities of the key stakeholders are discussed in section above. The
hiring of trustee, and the manager shall be as per the procurement guidelines
as applicable.
v. Registration of REIT with SEBI – The trust needs to be registered with SEBI as a
Real Estate Investment Trust (REIT). Towards this, the sponsor shall put forward
an application for registration with SEBI as per the format laid out in Schedule I
of the SEBI REIT Regulations 2014. The key documentations include: (a) General
information (b) Details of Trust (c) Details of Trustee (d) Details of Sponsor(s)
(e) Details of Manager (f) Details of Business plan and investment strategy (g)
Details of any regulatory actions and other declarations.
vi. Completion of transfer of asset – Based on the applicable rules/ guidelines,
the sponsor(s) shall transfer or undertake to transfer to the REIT, its entire
shareholding or interest [and rights] in the [holdco and/ or] SPV or ownership
of the real estate properties, subject to a binding agreement.
vii. Issue process and allotment of units – REIT shall make an initial offer of its
units by way of public issue only
62
. The issue process provides a window for the
investors to participate in the bidding process for the REIT. The investors shall be
allocated the proportional share in the number of units issued. The bidders shall
submit their bids for the units within the bid/issue period to the lead manager.
The registrar shall provide a schedule of bids received which shall indicate the
bid amount received in respect of each bid. The allotment may be discretionary
or based on some pre-determined criteria.
62 Any subsequent issue of units by the REIT may be by way of follow-on offer, preferential allotment,
qualified institutional placement, rights issue, bonus issue, offer for sale or any other mechanism and in
the manner as may be specified by the Board.
59Transaction Stage Volume I: Monetisation Guidebook 5.3 PPP CONCESSION BASED MODELS – FRAMEWORK AND
PROCESS
5.3.1 Regulatory framework and Institutional stakeholders
Key Institutional initiatives for PPP based Projects by Government of India
In 2006, the Government took steps to create an ecosystem for mainstreaming PPPs.
This has been helpful to stakeholders in the PPP space, including private developers,
financial institutions and governments (at national, state and local levels). The key
policy and institutional initiatives undertaken include:
aSetting up of the PPP Appraisal Committee (PPPAC)
aExtending financing support through the VGF (Viability Gap Funding) Scheme
aPreparation of PPP toolkits, guidelines and knowledge dissemination products
aEstablishment of transparent and competitive bidding processes–through
standardized procurement documents
At the central-level, the PPP Appraisal Committee (PPPAC) recommends project for
approval of competent authority for central sector projects. Further, line ministries/ public
sector agencies have adopted model concession agreements prepared by NITI Aayog
(erstwhile Planning Commission). Alternatively, respective sector-specific MCAs have been
developed to enable a transparent and streamlined process.
At the state-level, a few states in India have created the regulatory and institutional
structure to aid public private partnership. Key states which have a clearly defined legal
framework for private investment in public infrastructure are Andhra Pradesh, Gujarat,
Karnataka, Tamil Nadu, Uttar Pradesh, Madhya Pradesh, Rajasthan, Orissa, etc.
5.3.2 PPP procurement process
The project preparation activities of the project can be divided into three phases – project
identification (covered under Section 3), project development and approval (feasibility
studies, detailed technical studies and final approval) and project procurement.
The Project development and approval of PPP Projects has already been covered in the
previous section.
The procurement process is the process of selection of private partner. It is important
that the process of selection of the private partner is transparent, non-discriminatory,
and timely to ensure project success. While competitive procurement processes have
been the overarching theme for PPP procurement in India, the procurement steps and
regulations covering the same vary across agencies.
60Transaction Stage Volume I: Monetisation Guidebook The procedure for PPP procurement may be divided into the following four stages:
Request for
qualification
Request for
proposal
Bid evaluation
and award
Commercial close
The objective of
stage is to gather
information on
the capacities of
Applicants and
shortlisting based
on requirements to
deliver on project
outcomes.
Financial bids
from qualified
applicants (after
the RFQ stage) for
undertaking the
PPP project
Evaluation of the
RFP submissions
of the private
sector bidder and
selecting the best
proposal based on
a pre-determined
criteria.
Last stage in
procurement process
where the private
sector partner enters
in to a formal contract
with the public
sector agency for
the implementation/
management of the
PPP project.
Figure 30: Procedure for Public Procurement
61Transaction Stage Volume I: Monetisation Guidebook Key imperatives
for Monetisation
6
This section provides an
overview of the initiatives by
Government and other
key actions suggested
for provision of
fillip to asset
monetisation
Key imperatives for Monetisation 63 6.1 RECENT INITIATIVES BY GOVERNMENT OF INDIA
The Government, over the past few years, has consistently focused on reforms and
initiatives for boosting private participation in infrastructure. And with this objective, have
been the recent initiatives towards streamlining the process of capital recycling through
asset monetisation, by public and private sector entities. Some of the key initiatives, under
Budget 2021-22, aimed at increased adoption of financing instruments and for enabling
assets monetisation by public sector entities include:
A. Increased adoption of Financing Instruments
Key amendments pertaining to InvIT/ REIT
—Access to funds
In order to enable debt financing of InVITs and REITs by Foreign Portfolio
Investors (FPIs), Finance Act 2021 has enabled amendments in the Securities
Contracts (Regulation) Act, 1956 for recognising InvITs, REITs as “securities”.
Related amendments in SARFAESI Act and Recovery of Debts due to Banks
and Financial Institutions Act have also been undertaken under the Finance Act
2021
63
.
This will enable InvITs and REITs to borrow money from FPIs and issue debt
securities, thereby enabling replacement of expensive debt with cheaper funds.
—Streamlining taxation
Budget 2021-22 has provided clarification with respect to dividend not being
taxable at the trust level (dividend distribution tax) but in the hands of the
unitholder (dividend withholding tax). Dividend payment to REIT and InVIT will
hence be exempt from TDS.
B. Enabling Asset Monetisation by Public Sector Entities
GoI has undertaken several initiatives to address the operational/commercial challenges as
also to incentivize State Governments and State level entities undertaking monetisation.
The key initiatives include:
Incentive Mechanism for Capital Expenditure by State Governments
—Under the recently institutionalised Scheme for Special Assistance to States for
capital expenditure for FY 2021-22, it has been decided that incentives be provided
for asset monetisation and disinvestment by State government/ entities. As an
incentive for asset monetisation, additional allocation equivalent to 33% of value
of assets realised and deposited in State consolidated funds or in account of State
public sector enterprises owning the assets. The allocation and disbursement is
subject to the realised amount being necessarily used for capital expenditure by
States.
63 Provisions under Part IV, Part IX and Part XI of Finance Act 2021
64Key imperatives for Monetisation Volume I: Monetisation Guidebook Stamp duty exemption on asset transfer from one Government-owned entity
to another such entity
—At present, assets of key CPSEs reside in their respective balance sheets. However,
monetisation may require transfer of such assets from the CPSEs’ balance sheet
to another entity or an SPV which typically may attract stamp duty implications,
ranging between 5%-10% across states, thus significantly reducing monetisation
proceeds / benefits accruing to selling CPSEs.
—To address this challenge, GoI through the Finance Act 2021 has provided
for exemption of stamp duty towards transfer of asset between Government
entities
64
, subject to certain requirements. This is aimed at creating a level-playing
field for asset monetisation (especially through the InvIT/ REIT route where stamp
duty cost was a significant impediment to asset transfer and consequent asset
monetisation).
Tax neutral provision for demerger
—The Finance Act 2021, has added an explanation to the Section 2 (19AA) of the
Income Tax Act, 1961, stating that the reconstruction or splitting up of a public
sector company into separate companies shall be deemed to be a demerger
provided that the process involves transfer of asset to the resultant company,
and the resultant company is a public sector company
65
.
—The demerger of companies as defined under this Section 2 (19AA) is considered
as tax neutral and hence avoids any capital gains tax implication. Besides, set
off and carry forward of losses would be allowed if proposed conditions under
section 72AA of the Income Tax Act, 1961 are complied with. Benefits of past
losses, if any, are also available. In view of loss of carry forward losses, tax holiday
benefits etc. no longer being impediments, these changes are expected to ease
the asset monetisation process for public sector infra companies
Other Relevant Aspects
Amendments to Regulations for InvIT and REIT by SEBI
—Increase in borrowing limits for InvIT and Reduction in minimum allotment
and trading lot requirements for investors in publicly issued InvITs and REITs
The limit for consolidated borrowing and deferred payments under SEBI’s
regulations for Infrastructure Investment Trust has been enhanced to 70% (from
49%) of the InvIT value; subject to key requirements being fulfilled viz.
64 Excerpt from the Finance Act is as follows: “………any instrument for conveyance or transfer of a business
or asset or right in any immovable property from a Government company, its subsidiary, unit or joint
venture, by way of strategic sale or disinvestment or demerger or any other scheme of arrangement,
to another Government company or to the Central Government or any State Government, or to the
development finance institution by any law made by the…...”. , “Government company” shall have the
same meaning as assigned to it in clause (45) of section 2 of the Companies Act, 2013
65 Section 3- Finance Act 2021
65Key imperatives for Monetisation Volume I: Monetisation Guidebook
Credit rating of AAA of the InvIT debt;
Funds be utilized only for acquisition or development of infrastructure
projects;
Track record of at least six distributions on a continuous basis, post listing, in
the year preceding the financial year in which the borrowings are proposed
to be availed; and
Prior approval of 75% unitholders
—Securities and Exchange Board of India recently made an amendment to InVITs/
REITs regulations for revision in minimum subscription and trading lot. Accordingly,
for publicly issued REITs and InvITs, the revised minimum application value was
brought down within the range of ₹10,000-15,000 and the trading lot to 1 unit.
This is expected to provide a boost to retail participation in InvITs/ REITs. The
decision to cut entry amount is significant, as it will allow small retail investors
to take part in these products.
Amendments to TOT framework
Key reform initiatives to widen the investor base for TOT transactions include:
—Flexibility in concession period – The concession period of toll projects may now
be between 15-30 years as against the fixed term of 30 years. This is expected to
increase participation from Indian developers in addition to large pension funds,
insurance companies, sovereign wealth funds.
—Reduced minimum operating history requirement –Minimum operating history of
one year compared to two years of operations post commencement of tolling is
expected to expand the eligible universe of operating toll roads to be considered
under the TOT package
Model Concession Agreements (MCAs)
—MCAs developed by NITI Aayog have been adopted by various sector to enable an
evolved contractual framework, enhanced clarity on loss protection to investors
and lenders, clearly defined obligations of stakeholders, etc. while roads (for
TOT, BOT (toll) and HAM road assets), airports (for OMDA), and ports have
availed and evolved the model concession framework over time, recently MCAs
have been developed across high potential sectors like Railways (Railway station
development, passenger train operations) etc. There is a need to develop model
PPP concession frameworks for various other brownfield asset classes identified
under the NMP for quicker adoption by public asset owners.
6.2 KEY IMPERATIVES
Asset Monetisation initiative has three critical stakeholders, the Government (Centre or
State) which monetises the asset, private investor taking on ownership/ management
66Key imperatives for Monetisation Volume I: Monetisation Guidebook and the general public who are typically the users of the asset. There are considerations
of each of these stakeholder groups which must be met in order to effectively roll out a
successful asset monetisation programme.
The imperatives to give a thrust to asset monetisation are anchored across three
themes – (1) Expansion of the investor base and scaling of monetisation instruments
(2) Strengthening demand-side capacity, and (3) Creating effective frameworks to aid
monetisation.
Figure 31: Imperatives for Asset Monetisation
Pillar 1: Expanding the investor base and scaling up instruments
Streamlining investment
guidelines
The long-term nature of infrastructure projects requires active
participation from investors looking at a similar return profile from
their investments. However, the existing investment guidelines for
insurance and pension funds limit the exposure of such funds
to InvIT/ REIT assets. The investment limit are as follows: (i)
Insurance funds – Maximum exposure at lower of 3% of fund
size of the Insurer/ 5% of the units issued by a single InvIT/ REIT
(ii) Pension funds under EPFO are also regulated to invest up to
maximum of 5% of the funds in REIT/ InvIT (iii) Mutual funds can
invest up to 10% of their Assets under management in a single
InvIT/ REIT. These need to be streamlined to ensure consistency.
Moreover, there are also inconsistencies across categories on
the level of exposures. For example: IRDA regulations do not
permit investment of insurance funds in unlisted InvITs. Hence,
a staggered approach for streamlining of investment guidelines
and limits is envisaged to keep pace with the growth in the InvIT
market starting with the allocation of insurance and pension
funds towards unlisted InvITs.
Tax benefits
More tax-efficient and user-friendly mechanisms like allowing tax
benefits in InvITs as eligible security to invest under Section 54EC
of the Income-Tax Act, 1961, are important starting points for
initiating retail participation in the instruments.
67Key imperatives for Monetisation Volume I: Monetisation Guidebook Recourse under
Insolvency and
Bankruptcy Code (IBC)
Since the trusts are not considered as ‘legal person’ under the
extant regulations, the IBC regulations are not applicable for
InvIT loans. Hence, the lenders do not have existing process for
recourse to project assets. While the lenders are protected under
the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002 (“SARFAESI Act”)
and the Recovery of Debts and Bankruptcy Act, 1993 (the “RDB
Act”), the provision of recourse under IBC regulations will bring
in added level of comfort for the investors.
Pillar 2: Strengthening demand-side actions
Establish a transparent
and independent
process for setting cost-
reflective user charges
Development of scalable models for asset monetisation requires
a clear and transparent pricing framework for infrastructure
services which is commensurate with the risks transferred. Simply
put, the developer/ investor would envisage a risk-adjusted
return that justifies the investments towards asset development/
maintenance.
Reforming the financial
management and
accounting practices to
aid monetisation
The delineation of the revenue and expenditure specific to
the assets is an important pre-requisite for asset monetisation
transaction. The public sector agencies should increasingly
move towards asset-level financial disclosures and earmarking
of specific revenue streams across all the assets, which will help
establish investor comfort.
Creating institutional
structures for fast-
tracking asset
identification and
monetisation transaction
The institutional backbone for scaling up asset monetisation
may be anchored at the level of the relevant ministries. With the
National Monetisation Pipeline (NMP), each ministry may establish
suitably empowered working group with the sole mandate to
identify assets, method of monetisation and handhold in the
transactions/ procurement process. This pipeline will also form a
baseline for the Ministry for monitoring and tracking performance
and data on the potential assets.
Pillar 3: Creating effective frameworks to aid monetisation
Standard agreements
should be developed
across sectors
Robust MCAs have been developed in roads, ports and airport
sectors and investors have received these agreements well which
has manifested itself through increased investor participation in
projects from these sectors. There is a need to develop model
PPP concession frameworks for various other brownfield
asset classes identified under the NMP for quicker adoption
by public asset owners.
68Key imperatives for Monetisation Volume I: Monetisation Guidebook Arrangements for
monetisation backed
by a robust incentive
mechanism
Similar to the National Partnership Agreements on asset recycling
in Australia, the Government of India may enter into formal
working arrangements with each line ministry/ CPSE/ States to
create medium-term road map for asset monetisation in line with
the NMP. The agreements shall lay out the timelines, roles and
responsibilities of each parties, preparatory actions and financing
modalities (including technical assistance support) over a 4-5 year
period. A Mechanism to plough back monetisation proceeds in
form of incentives to the public sector agency (to the extent that
the monetisation proceeds are utilized towards creation of new
assets) has already been institutionalised as highlighted above.
Effective contract and
dispute resolution
mechanisms honoring of
contracts
Contract management is a critical element in the monetisation
jigsaw. Effective mechanisms for contract management,
arbitration and conciliation are important to ensure success of
monetisation. In order to boost investor confidence, it is crucial
to maintain sanctity of contracts. The provisions should be legally
enforceable, such that once parties duly enter into a contract,
they must honour their obligations under that contract and, in
case they don’t honour, there should be adequate safeguards for
other stakeholders. This should be applicable to both public and
private sectors. Sensitising state governments and local bodies
on honoring of contracts is crucial issue.
69Key imperatives for Monetisation Volume I: Monetisation Guidebook Annexure
Annexure 71 ANNEXURE I : CIRCULARS, RULES AND GUIDELINES
PERTAINING TO INVIT
The other circulars, rules and guidelines pertaining to InvIT are as follows:
aSEBI circular dated May 11, 2016 on Guidelines for public issue of units of InvITs
aSEBI circular dated October 20, 2016 on Disclosure of financial information in
offer document/placement memorandum for InvITs
aSEBI circular dated November 29, 2016 on Continuous disclosures and
compliances by InvITs
aSEBI circular dated January 18, 2018 on participation by Strategic Investor(s) in
InvITs and REITs
aSEBI circular dated April 13, 2018 on Guidelines for issuance of debt securities
by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts
(InvITs)
aSEBI circular dated April 23, 2019 on Guidelines for determination of allotment
and trading lot size for Real Estate Investment Trusts (REITs) and Infrastructure
Investment Trusts (InvITs)
aSEBI circular dated November 27, 2019 (amended on November 17, 2020) on
Guidelines for preferential issue of units and institutional placement of units
by a listed Infrastructure Investment Trust (InvIT)
aSEBI circular dated December 24, 2019 on Guidelines for filing of placement
memorandum-InvITs proposed to be listed
aSEBI circular dated November 04, 2020 on Guidelines for rights issue of units
by an unlisted Infrastructure Investment Trust (InvIT)
Loans to InvIT – RBI Regulations
As per an RBI circular dated October 14, 2019 (RBI/2019-20/83, DBR. No.BP.
BC.20/08.12.014/2019-20), the central bank has now issued guidelines on bank lending
to InvITs. Such bank lending to InvITs would be subject to the following conditions:
aBanks are required to formulate a board-approved policy on exposure to
InvITs covering processes, such as appraisals, loan sanctions, exposure limits,
and mechanisms for monitoring
aBanks are required to undertake thorough assessment of sufficiency of cash
flows at the InvIT level to ensure timely debt servicing
aThe overall leverage of InvIT and the underlying SPVs together should be
within the permissible limits prescribed in the board approved policy of the
bank
aBanks are required to monitor the performance of underlying SPVs, as the
ability of an InvIT to meet debt obligation depends on the performance of
the underlying SPVs
72Annexure Volume I: Monetisation Guidebook
Banks are required to lend to only those InvITs, where the underlying SPVs
have existing debt and are not facing any financial difficulties
Borrowing company should provide infrastructure facilities and should have
satisfactory net worth
Borrowing company or its directors/ promoters should not have defaulted
on bank/FI loans
Bank financing to be restricted to 50% of the finance required for acquiring
the promoter’s stake
Tenor of bank loans should not be longer than seven years
Bank financing acquisition of shares by promoters should be within the
regulatory ceiling of 40% of their net worth as of March
31 of previous year
Board should have approved the proposal for bank finance
Compliance with statutory requirement as mentioned under Section 19(2) of
the Banking Regulations Act, 1949
Source: RBI circular dated October 14, 2019 (RBI/2019-20/83, DBR. No.BP.BC.20/08.12.014/2019-20, National
Infrastructure pipeline 2020
The other circulars, rules and guidelines pertaining to REIT are as follows:
SEBI circular dated December 19, 2016 (amended on January 15, 2019) on
Guidelines for public issue of units of REITs
SEBI circular dated December 26, 2016 on Disclosure of financial information in
offer documents for REITs
SEBI circular dated December 29, 2016 on Continuous disclosures and
compliances by REITs
SEBI circular dated January 18, 2018 on participation by Strategic Investor(s) in
InvITs and REITs
SEBI circular dated April 13, 2018 on Guidelines for issuance of debt securities
by Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts
(InvITs)
SEBI circular dated April 23, 2019 on Guidelines for determination of allotment
and trading lot size for Real Estate Investment Trusts (REITs) and Infrastructure
Investment Trusts (InvITs)
SEBI circular dated November 27, 2019 (amended on September 28, 2020) on
Guidelines for preferential issue of units and institutional placement of units by
a listed Real Estate Investment Trust (REIT)
SEBI circular dated January 17, 2020 (amended on March 13, 2020) on Guidelines
for rights issue of units by a listed Real Estate Investment Trust (REIT)
73Annexure Volume I: Monetisation Guidebook NATIONAL MONETISATION PIPELINE
Copyright © NITI Aayog, 2021
NITI Aayog, Sansad Marg,
New Delhi-110001
Designed b y
NATIONAL
MONETISATION
PIPELINE
VOLUME I: MONETISATION GUIDEBOOK NATIONAL MONETISATION PIPELINE
NITI Aayog
Designed by
NATIONAL
MONETISATION
PIPELINE
VOLUME II: ASSET PIPELINE
VOLUME II vol-2_National Monetization Pipeline.indd 1vol-2_National Monetization Pipeline.indd 117/08/21 12:11 PM17/08/21 12:11 PM vol-2_National Monetization Pipeline.indd 2vol-2_National Monetization Pipeline.indd 217/08/21 12:11 PM17/08/21 12:11 PM NATIONAL MONETISATION PIPELINE
Volume II : Asset Pipeline
GOVERNMENT OF INDIA
NEW DELHI
vol-2_National Monetization Pipeline.indd 1vol-2_National Monetization Pipeline.indd 117/08/21 12:11 PM17/08/21 12:11 PM vol-2_National Monetization Pipeline.indd 2vol-2_National Monetization Pipeline.indd 217/08/21 12:11 PM17/08/21 12:11 PM
1.Context and Approach 1
1.1 Union Budget 2021-22 2
1.2 Centre’s Incentive Scheme for Capital Expenditure by States 3
1.3 National Monetisation Pipeline 5
1.4 Approach to NMP 6
2. National Monetisation Pipeline 11
2.1 Consolidated Pipeline 12
2.2 Sectoral break-up 13
2.3 Pipeline phasing 14
2.4 Share of overall asset base monetised 15
3. Sector – wise Pipeline 17
3.1 Roads 18
3.2 Railways 24
3.3 Power transmission 38
3.4 Telecom 45
3.5 Power generation 51
3.6 Natural gas pipelines 55
3.7 Petroleum, petroleum product pipelines & other assets 60
3.8 Warehousing assets 65
Contents
iiiContents
vol-2_National Monetization Pipeline.indd 5vol-2_National Monetization Pipeline.indd 517/08/21 12:11 PM17/08/21 12:11 PM 3.9 Mining assets 71
3.10 Airports 75
3.11 Ports 81
3.12 Sports stadia 87
3.13 Urban Real Estate Assets 92
954. Implementation Plan
Annexure 97
ivContents Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 6vol-2_National Monetization Pipeline.indd 617/08/21 12:11 PM17/08/21 12:11 PM LIST OF FIGURES
Figure 1: Imperative for Asset Monetisation 2
Figure 2: Key Contours of the Scheme for Special Assistance to States for Capital
Expenditure 4
Figure 3: NMP : Medium term road map for Monetisation 5
Figure 4: Schematic of NMP Approach 6
Figure 5: Sector wise Monetisation Pipeline over FY 2022-25 (Rs crore) 13
Figure 6: NMP – Share of sectors in terms of indicative monetisation value in NMP 14
Figure 7: Indicative value of the monetisation pipeline year-wise (Rs crore) 15
Figure 8: Indicative value of Roads Monetisation pipeline (Rs crore) 21
Figure 9: Region-wise key stretches included in the pipeline over FY 2022-2025 23
Figure 10: Pipeline phasing – Railway assets (Rs crore) 29
Figure 11: Monetisation of Track OHE infrastructure – transaction structure 32
Figure 12: Pipeline phasing – power transmission (Rs crore) 41
Figure 13: Proposed structure – PGCIL InvIT 42
Figure 14: Pipeline phasing – Telecom assets (Rs crore) 48
Figure 15: Monetisation pipeline phasing – power generation (Rs crore) 54
Figure 16: Pipeline phasing – Natural gas pipelines (Rs crore) 59
Figure 17: Pipeline phasing – Petroleum product / LPG pipeline & other assets (Rs crore) 64
Figure 18: Monetisation value – Warehousing (Rs crore) 68
Figure 19: Phasing of Monetisation pipeline – coal mining (Rs crore) 74
Figure 20: Phasing of Monetisation pipeline – airports (Rs crore) 78
Figure 21: Monetisation pipeline phasing – Ports (Rs crore) 85
Figure 22: Snapshot of the JLN stadium asset (New Delhi) 90
Figure 23: Implementation framework 96
vContents Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 7vol-2_National Monetization Pipeline.indd 717/08/21 12:11 PM17/08/21 12:11 PM LIST OF TABLES
Table 1: Asset class-wise approach adopted for indicative monetisation value 9
Table 2: Total Potential Asset Base for key asset classes 25
Table 3: Railway assets considered for monetisation 26
Table 4: Asset-wise phasing of monetisation value (Rs crore) 29
Table 5: Snapshot of Transaction structure 31
Table 6: Comparative assessment of COT Vs InVIT Models for monetising Freight
Corridor 37
Table 7: Phasing of monetisation value – Telecom assets (Rs cr) 48
Table 8: Project packages envisaged under Bharatnet 49
Table 9: Phasing of pipeline of power generation Assets (figures in MW) 53
Table 10: Operational Natural Gas Pipelines of GAIL (Common Carrier + Dedicated) 56
Table 11: Phasing of assets identified for monetisation 62
Table 12: Phasing of monetisation value – Petroleum product / LPG pipeline & other
assets (Rs cr) 63
Table 13: Phasing of monetisation value – Warehousing assets (Rs cr) 68
Table 14: Phasing of Mineral Blocks 73
Table 15: Assumed phasing considered for capex of identified airports 78
Table 16: Phasing for Airport assets identified for monetisation 79
Table 17: Passenger traffic (in FY 19 & 20) and existing capacity of the identified airports 80
Table 18: Pipeline of Ports projects over FY22-25 83
Table 19: Port Projects to be tendered out during FY2021-22 83
Table 20: Port Projects to be tendered out during FY2023-25 84
Table 21: Identified projects–Redevelopment of Colonies 92
Table 22: Identified projects–ITDC Hotel assets 93
viContents Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 8vol-2_National Monetization Pipeline.indd 817/08/21 12:11 PM17/08/21 12:11 PM AcronymDefinition
AAIAirports Authority of India
BOOBuild-Own-Operate
BOQBill Of Quantities
BOTBuild-Operate-Transfer
BPCLBharat Petroleum Corporation Ltd
BSEBombay Stock Exchange
BSNLBharat Sanchar Nigam Limited
CCOCoal Controller’s Organisation
CEOChief Executive Officer
CERCCentral Electricity Regulatory Commission
CILCoal India Limited
CODCommercial Operations Date
CPSECentral Public Sector Enterprise
CRWCLCentral Railside Warehouse Company Limited
CWCCentral Warehousing Corporation
DFCCIL Dedicated Freight Corridor Corporation of India Limited
DFIDevelopment Finance Institution
DWTDeadweight Tonnage
EPCEngineering, Procurement and Construction
ESGEnvironmental, Social and Governance
FBBFixed Broadband
FCIFood Corporation of India
List of
Abbreviations
viiList of Abbreviations
vol-2_National Monetization Pipeline.indd 9vol-2_National Monetization Pipeline.indd 917/08/21 12:11 PM17/08/21 12:11 PM FDIForeign Direct Investment
GAILGas Authority of India Limited
GISGeographic Information System
HAMHybrid Annuity Model
HPCLHindustan Petroleum Corporation Limited
IDBIIndustrial Development Bank of India
IOCLIndian Oil Corporation Ltd.
IPAInitial Portfolio of Asset
IRSDCIndian Railway Stations Development Corporation Limited
JLNJawaharlal Nehru Stadium
JNPTJawaharlal Nehru Port Trust
LFPLand Fall Point
LILOLoop-In-Loop-Out
LMTLakh Metric Tonnes
LNGLiquefied Natural Gas
LPGLiquefied Petroleum Gas
MCAModel Concession Agreement
MCLRMarginal Cost of Funds-based Lending Rate
MDOMine Developer and Operator
MFCMulti-functional Complexes
MIRAMacquarie Infrastructure and Real Assets
MIVMaritime India Vision
MMLHMulti Modal Logistics Hub
MMTPAMillion Metric Tonnes Per Annum
MTNLMahanagar Telephone Nigam Limited
MTPAMillion Tonnes Per Annum
MVAMega Volt Amp
NBFIDNational Bank for Financing Infrastructure and Development
NDCPNational Digital Communications Policy
NHAINational Highways Authority of India
NHPCNational Hydroelectric Power Corporation
NIPNational Infrastructure Pipeline
NITINational Institution for Transforming India
NLCNLC India Limited (formerly Neyveli Lignite Corporation Limited)
NMPNational Monetisation Pipeline
NRPNational Rail Plan
NSENational Stock Exchange
viiiList of Abbreviations Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 10vol-2_National Monetization Pipeline.indd 1017/08/21 12:11 PM17/08/21 12:11 PM NSECNetaji Subhas Eastern Regional Centre
NSSCNetaji Subhas Southern Centre
NSWCNetaji Subhas Western Centre
NTPCNational Thermal Power Corporation Limited
OFCOptical Fibre Communication
OHEOver Head Equipment
OMDAOperations, Management and Development Agreement
OMTOperate Maintain and Transfer
ONGCOil and Natural Gas Corporation Limited
ORROuter Ring Road
PEGPrivate Entrepreneurs Guarantee
PFCPower Finance Corporation
PFTPrivate Freight Terminal
PGCILPower Grid Corporation of India Limited
PNGRBPetroleum and Natural Gas Regulatory Board
PPPPublic-Private Partnership
PUAPipeline Usage Agreement
RECRural Electrification Corporation
REITReal Estate Investment Trust
RFPRequest for Proposal
RFQRequest for Qualification
ROWRight of Way
RPORenewable Purchase Obligations
RTMRegulated Tariff Mechanism
SAISports Authority of India
SARODSociety For Affordable Redressal Of Disputes
SEBISecurities and Exchange Board of India
SECISolar Energy Corporation of India
SJVNLSatluj Jal Vidyut Nigam Limited
SPVSpecial Purpose Vehicle
STPSSuper Thermal Power Station
TBCBTariff Based Competitive Bidding
TEUTwenty Feet Equivalent Unit
TOTToll-Operate-Transfer
TSATransmission Service Agreement
USDUnited States Dollar
WPIWholesale Price Index
ixList of Abbreviations Volume II: Asset Pipeline
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Approach
1
Context and Approach 1
vol-2_National Monetization Pipeline.indd 1vol-2_National Monetization Pipeline.indd 117/08/21 12:11 PM17/08/21 12:11 PM India’s National Infrastructure Pipeline (NIP) envisages an infrastructure investment of
Rs 111 lakh crore over the five-year period (FY 2020-25). Financing of infrastructure
investments at such scale necessitates a re-imagined approach and tapping alternative
financing through innovative ways.
As estimated by the Report of Task Force for NIP (2019), traditional sources of capital are
expected to finance 83–85%
1
of the capital expenditure envisaged under NIP. About 15-
17% of the aggregate outlay is expected to be met through innovative mechanisms such
as Asset Recycling & Monetisation and new long-term initiatives such as Development
Finance Institution (DFI).
Figure 1: Imperative for Asset Monetisation
As per NIP, asset recycling and monetisation mechanism may finance around 5-6% of the aggregate capex under NIP. In the wake of Covid – 19 however, there is a pressing need on the public outlay towards social sector priorities and economic stimuli initiatives, thereby necessitating exploring of alternatives mechanisms such as Asset Monetisation with an increased vigour.
1.1 U<> NION BUDGET 2021-22
GoI’s strong and continued commitment towards stepping up spending on infrastructure and keeping the investments planned under NIP on track, was reinforced in the landmark Union Budget 2021-22. A three-pronged strategy was laid out in the Budget: Firstly, by creating institutional structures; secondly, through a big thrust on Asset Monetisation, and thirdly by enhancing share of capital expenditure in central and state budgets. Key initiatives under the Union Budget 2021-22 that have laid the foundation for enhanced infrastructure investments include:
1 To be raised through budgetary resources debt from bond markets, banks and NBFCs; equity from
private developers, external aid multilateral and bilateral agencies and internal accruals of PSUs would
comprise 4–10% as per NIP document, DEA
2Context and Approach Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 2vol-2_National Monetization Pipeline.indd 217/08/21 12:11 PM17/08/21 12:11 PM Union Budget 2021-22 – Laying the foundation
!Development Finance Institution – The budget provided for establishing
a professionally managed DFI to act as a provider, enabler and catalyst of
infrastructure financing. Subsequently, the National Bank for Financing Infrastructure
and Development (NBFID) Bill, 2021 was passed. The bill enabled the creation of a
DFI – “NBFID”, as a corporate body with authorised share capital of Rs 1 lakh crore.
The central government’s share in the entity is envisaged to remain above 26%
(currently at 100%) and the Central Government envisages to capitalise this DFI
with initially Rs 20,000 crore. The central government will also provide guarantee
at a concessional rate of up to 0.1% for borrowing from multilateral institutions,
sovereign wealth funds, and other foreign funds. The budget envisioned the DFI
to have a lending portfolio of at least Rs 5 lakh crore in three years’ time.
!Asset monetisation – The Union Budget has laid out the importance of “monetising
operating public infrastructure assets for new infrastructure construction”. Towards this, the budget provided for preparing a “National Monetisation Pipeline (NMP)” of potential brownfield infrastructure assets and an “Asset Monetisation dashboard” for tracking the progress and to provide visibility to investors.
Union Budget
2021-22:
Asset Monetisation
mandate
Budget 2021-22 laid
significant emphasis
on infrastructure
development
Monetisation as
fnancing mechanism
for enhanced spending
on infrastructure
National Monetisation
Pipeline (NMP) as a
medium term
roadmap
Identifcation of
Assets and
ministries/entities
under the program
Dashboard for
tracking progress
Towards this objective, National Institution for Transforming India (NITI) Aayog has initiated
an exercise for creation of National Monetisation Pipeline (NMP).
1.2 CENTRE’S INCENTIVE SCHEME FOR CAPITAL EXPENDITURE
BY STATES
Capital expenditure creates employment, especially for the poor and unskilled, has a high
multiplier effect, enhances the future productive capacity of the economy, and results
in a higher rate of economic growth. Recognising the criticality of enhanced capital
expenditure on infrastructure, Government of India has undertaken several initiatives to
address the operational/commercial challenges faced by asset owners in undertaking
monetisation and to incentivize State Governments and State level entities in undertaking
monetisation.
3Context and Approach Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 3vol-2_National Monetization Pipeline.indd 317/08/21 12:11 PM17/08/21 12:11 PM Central Government launched a “Scheme for Special Assistance to States for Capital
Expenditure” as part of ‘Aatma Nirbhar Bharat’ package in September 2020 to boost
capital expenditure by state governments reeling under the financial impact of COVID-19
pandemic. Union Budget 2021-22 further announced that the Centre would take measures
to incentivise States to spend more on infrastructure and to incentivize disinvestment of
their public sector enterprises.
Under the Department of Expenditure,
Scheme, financial assistance is provided
to the State Governments in the
form of 50-year interest free loan.
This recently institutionalised Scheme
provides incentives to states for asset
monetisation and disinvestment by State
government/ entities. As an incentive for
asset monetisation, additional allocation
equivalent to 33% of value of assets
realised is envisaged to be deposited in
State consolidated funds or in account of State public sector enterprises owning the
assets. The allocation and disbursement is subject to the realised amount being necessarily
used for capital expenditure by States.
Figure 2: Key Contours of the Scheme for Special Assistance to States for
Capital ExpenditureIncentives for
—Disinvestment through minority
stake sale
—Listing of SPSEs and disinvestment of stake
—Privatisation (Strategic Disinvestment)
—Asset Monetization/Recycling
4Context and Approach Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 4vol-2_National Monetization Pipeline.indd 417/08/21 12:11 PM17/08/21 12:11 PM Monetization of assets unlocks their value, eliminates their holding cost and enables scarce
public funds to be deployed to new projects, thus speeding up the implementation of the
National Infrastructure Pipeline. Funds provided to the States under the scheme by the
Government of India shall be used for new and ongoing capital projects, for long term
benefit to the State. The funds may also be used for settling pending bills in ongoing
capital projects.
1.3 NATIONAL MONETISATION PIPELINE
Creation of National Monetisation Pipeline (NMP) is Government of India’s pioneering
initiative to establish a medium-term pipeline along with a roadmap for “monetisation-
ready” assets. Developed in the backdrop of the unprecedented Covid-induced economic
and fiscal shocks, NMP lists out assets and asset classes, under various infrastructure
ministries, which will be monetised over a period of time.
NMP provides ‘visibility’ on the volume of assets to be monetised and the potential
value that can be unlocked. The Government’s commitment to scale up infrastructure
investments despite the fiscal pressures reflects the critical role of infrastructure on the
overall economic growth and recovery and expected multiplier effect. NMP shall also
serve as a medium – term roadmap of the potential financing opportunities and drive
preparedness of public sponsor as well as private sector/ institutional investors towards
financing the infrastructure gap.
Figure 3: NMP : Medium term road map for Monetisation
Key Objectives of NMP are:
i. Serve as a medium-term roadmap for the line ministries and agencies
ii. Provide medium-term visibility to investors on infrastructure assets pipeline
iii. Provide a platform for ministries to track asset performance
iv. Bring in greater efficiency and transparency in public assets management
5Context and Approach Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 5vol-2_National Monetization Pipeline.indd 517/08/21 12:11 PM17/08/21 12:11 PM Report on NMP has been organised in two volumes (i) Guidance book for asset monetisation
(Volume I) and (ii) Roadmap for asset monetisation over the medium term, including the
pipeline of infrastructure assets (Volume II).
NMP Volume II focusses on the latter and provides an annual phasing of the asset
pipeline to be monetised along with the value over the four-year period – FY 2022 to
FY 2025. The NMP period has been kept co-terminus with the remaining period of the
National Infrastructure Pipeline (NIP).
1.4 APPROACH TO NMP
The NMP has been created on a best effort basis by aggregating the information provided by various stakeholders including line ministries, departments as well as assessments of secondary information available on existing infrastructure assets in each of the sectors.
A bottom-up approach has been adopted wherein the existing core infrastructure asset
base managed under central sector agencies was identified and mapped. The core
infrastructure assets covered include roads, ports, airports, telecom, railways, warehousing,
energy pipelines, power generation, power transmission, hospitality and sports stadiums.
Besides these conventional infrastructure sectors, assets from mining and housing
redevelopment sectors have also been included in the NMP owing to the potential of
these sectors to spur private sector investment and to enable tracking of transactions as
part of the Monetisation pipeline.
Monetization through disinvestment and monetization of non-core assets (such as land,
building, and pure play real estate assets) have not been included in the NMP. The
exhibit below provides an overview of the approach to drawing up the NMP:
Figure 4: Schematic of NMP Approach
Assets which are central to the business objectives of a public entity/ statutory body/ Government body and/or are being utilised for delivering infrastructure services to public/ users have been categorised as Core Assets for the purposes of monetisation.
For each sector, the NMP has been drawn up for the statutory bodies, public sector
enterprises and other such undertakings within the purview of ministries/ departments
6Context and Approach Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 6vol-2_National Monetization Pipeline.indd 617/08/21 12:11 PM17/08/21 12:11 PM of Govt. of India (‘Public Asset Owners)
2
. This is based on three key sets of information:
(i) Potential Asset Base, (ii) Assets considered for Monetisation and (iii) Indicative
Monetisation Value. A brief description of these three sets of information is listed below:
1. Potential Asset Base –‘Potential Asset Base’ refers to the infrastructure assets
under the purview of the central line ministries and CPSEs covered as part of the NMP exercise. Rather than focussing on the whole universe of assets under a ministry/ CPSE, the Potential Asset Base focusses on the assets that are sizeable and amenable to monetisation
3
. These include brownfield assets that are currently
operational as well as assets that are expected to be operational over the NMP period.
2. Assets considered for Monetisation – The ‘Assets considered for Monetisation’ are a part of the Potential Asset Base that is expected to be monetised over the NMP period (‘Assets for Monetisation’). The monetisation potential for asset
classes has been assessed based on multiple factors varying across sectors. This multi-factoral assessment has focussed on visible revenue streams, commercial potential, utilisation levels, investor appetite, ability to tap private sector efficiencies in operations and maintenance, policy focus to tap institutional investment in the sector. These factors differ from sector to sector and the assessment has been explained in detail in subsequent sections of this report.
3. Indicative Monetisation Value –The indicative monetisation value that is expected
to be realised by the public asset owner through the asset monetisation process, either in form of upfront accruals or by way of private sector investment, has been referred to as the Indicative Monetisation Value. It may be noted that several brownfield asset classes are proposed to be monetised through Operate Maintain and Develop (OMD) based models or assets where significant capex may be involved over transaction life towards augmentation or rehabilitation of assets. In such cases, estimated capex to be funded through private sector investment has been taken as indicative monetisation value. The value to the government hence may be in form of upfront consideration or by way of private sector investment. Under PPP based mechanisms, additional revenue streams that may accrue to the government towards revenue share and / or concession fee over and above the private investment has not been included as the same cannot be ascertained realistically at this stage.
Monetisation Value is only an indicative high level estimate based on thumb rule
estimates. Various approaches such as Market or Cost or Book Value or EV approaches as explained in this section have been adopted to determine indicative value of asset pipeline as applicable and available.
2 Currently includes only central government asset owners. Supplementary Volume for State level assets
is envisaged to be issued in due course
3 Further, for the purpose of the study, the Potential Asset Base has been restricted to a set of identified
entitles. Assets held via subsidiaries / step-down subsidiaries or JVs have not been included which may
be included later as necessary
7Context and Approach Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 7vol-2_National Monetization Pipeline.indd 717/08/21 12:11 PM17/08/21 12:11 PM The actual monetisation value will be determined based on detailed valuation or
feasibility studies (as may be applicable) at the stage of transaction structuring. Hence,
it would not be prudent to take the Indicative monetisation value as a reference rate
or value for any transactions in future. For certain assets, the potential for monetisation
may be limited or lower than estimates, while for certain assets significant upside
potential over the indicative Monetisation Value may exist which needs to be tapped
through appropriate structuring and instruments.
Further, the actual realization (whether by way of accruals or by way of private
investment), will depend on various factors and aspects such as transaction timing,
economic scenario, available capital and investor interest etc.
Following are the various approaches used to estimate the Indicative Monetisation Value
of the pipeline:
a. Market approach – Under the ‘market approach’, indicative value is determined based on comparable market transactions, wherever available, for the identified asset classes. For such transactions, the market value “per unit of asset” has been determined based on secondary review of reference transactions in the sector as may be available or applicable (such as per kilometre of roads, per ckt km of transmission asset, per MW of generation capacity etc.). The value is applied on the Assets for Monetisation to arrive at the Indicative Monetisation Value. The monetization value taken under the market approach has also been averaged out considering the range of quality/ marketability of assets available/ considered for monetization.
The market value based approach is only indicative and the actual consideration
that may accrue to the ministries/ CPSEs depends on the following factors:
(i) payment terms as envisaged under the instrument, (ii) market price discovery
through competitive bidding process (iii) the extent of assets monetised by the
ministries/ CPSEs
4
and (iv) asset quality.
b. Capex approach – The ‘Capex approach’ is considered for asset classes that may be monetised through PPP based models envisaging capex investment by private sector. In such cases, typically a sizeable capital expenditure towards expansion/ augmentation or improving the quality of infrastructure delivery is envisaged over the transaction life. Hence, in such cases the extent of private investment estimated towards such capex has been considered as indicative monetisation value.
The principle under the capex approach is that in the absence of the asset
monetisation transaction, the Public Asset Owner would have to incur the
outlay towards augmentation and O&M of the brownfield asset. Hence, this
approach captures savings to the Public Asset Owner by undertaking the asset
monetisation transaction. Additionally, revenue streams or proceeds may accrue
4 in case of InvIT transactions, this approach considers the total value of asset brought up for monetisation
(100% of the units), while the asset owner as sponsor of an InvIT may choose to monetize only a pre-
determined number shares/ units (resulting in upfront receipt of the proportional amount)
8Context and Approach Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 8vol-2_National Monetization Pipeline.indd 817/08/21 12:11 PM17/08/21 12:11 PM to the asset owners as concession granting authorities depending on the terms of
PPP concession (such as revenue share, concession fee, premium, royalty, etc.).
Further, the actual capex towards such outlays will happen over 2-3 years, and
sometimes in phases over concession life. Hence, for the purpose of estimating
the Indicative Monetisation Value, phasing has been assumed over 2-3 years from
the year of tendering out of the project.
c. Book value approach – The ‘book value approach’ is considered in case of asset
classes where information on comparable market transactions or estimated capex investment is not available. Further, the book value of the assets has been estimated considering the average capex cost incurred to construct a similar category of asset adjusted for the age of the asset/ number of years of operation and other such variables.
d. Enterprise value approach – The ‘Enterprise value (EV) approach’ is considered
for assets where information on existing revenue stream is available or can be reasonably projected based on assumptions and / or available data on prevailing tariff for an asset / asset class. In such cases, Net Present Value (NPV) of discounted cashflows
5
has been worked out to determine indicative monetisation
value. However, it may be noted that the EV based valuation at this stage is high level estimate only and the actual reference valuation will be arrived at by the asset owners at the stage of transaction preparation and structuring.
The approach adopted under the NMP to arrive at the indicative monetisation
value across various asset classes is summarised in the table below. Specific
assumptions and explanation of approach has been captured in respective
chapters of this Volume.
Table 1:
Asset class-wise approach adopted for indicative monetisation value
S.No. Sector/ assetApproach to monetisation value
1 RoadsMarket approach
2 PortsCapex approach
3 AirportsCapex approach
4 RailwaysRailway stations – Capex approach
Passenger trains – Capex approach
Private freight terminals – Capex approach
Railway colonies redevelopment – Capex approach
Track infrastructure under DFCCIL – Book value approach
Track, OHE – EV approach
5 Power generation Book value approach
6 Power transmission Market approach
5 Discounting of cash flows at the operating level has been done for select sectors based on reasonable
growth estimates
9Context and Approach Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 9vol-2_National Monetization Pipeline.indd 917/08/21 12:11 PM17/08/21 12:11 PM 7 Natural gas pipelineEV approach
8 Product pipeline EV approach
9 Sports stadium Capex approach
10 Warehousing Capex approach
11 TelecomCapex approach for Bharatnet fibre assets
Market approach for tower assets
12 MiningCapex approach
13 Urban Housing
redevelopment Capex approach
10Context and Approach Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 10vol-2_National Monetization Pipeline.indd 1017/08/21 12:11 PM17/08/21 12:11 PM National
Monetisation
Pipeline
2
National Monetisation Pipeline 11
vol-2_National Monetization Pipeline.indd 11vol-2_National Monetization Pipeline.indd 1117/08/21 12:11 PM17/08/21 12:11 PM 2.1 CONSOLIDATED PIPELINE
The total indicative value of NMP for Core Assets of Central Government has been
estimated at Rs 6.0 lakh crore over the 4 year period, FY22-25
The estimated value corresponds to ~5.4% of the total infrastructure investment envisaged
under the NIP which is ~Rs 111 lakh crore and ~14% of the proposed outlay for Centre (Rs
43 lakh crore). This pipeline of assets has been phased out over a four-year period starting
FY 2022 up till FY 2025.
Asset monetisation is critical to attract the required quantum of capital into infrastructure
sector. However, monetisation needs to be viewed not just as a funding mechanism, but
as an overall strategy for bringing about a paradigm shift in infrastructure augmentation,
service delivery and maintenance. Resource and capital efficiencies of private sector
along with the ability to dynamically adapt to the evolving global and economic reality,
necessitates looking at Asset Monetization as the key to value creation in Infrastructure.
It presents an immense opportunity for public asset owners to deleverage the balance
sheets and easing of fiscal space to take up more greenfield infrastructure creation. In
terms of other longer-term benefits, it creates an enabling environment for participation
of long-term institutional investors in infrastructure asset management.
NMP – Coverage of Volume II
NMP Volume II includes projects/ assets of central government line ministries and CPSEs in infrastructure sectors with high monetisation potential. The sectors include roads, ports, airports, railways, warehousing, gas & product pipeline, power generation, power transmission, mining, telecom, stadium and hospitality infrastructure.
State governments, state-level entities and urban local bodies also have a sizeable
infrastructure asset base with significant monetisation potential. Prominent asset
classes thereunder include state highways, energy distribution infrastructure, intra-
state transmission networks, urban transport, bus depots, water supply & sewerage
networks, gas pipelines (in certain states), sports stadium and district level sport
complexes etc.
State assets have not been included in this compendium of assets. The process of co-
ordination and collation of asset information/ pipeline from states is currently ongoing
and Supplementary Volume for same is envisaged to be issued in due course.
NMP Volume I and II are expected to serve as a guidebook and template for states
to evolve a common framework and approach for monetisation of core infrastructure
assets.
12National Monetisation Pipeline Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 12vol-2_National Monetization Pipeline.indd 1217/08/21 12:11 PM17/08/21 12:11 PM The breakup of the overall pipeline and the sectoral share is as provided in the figure below:
Figure 5: Sector wise Monetisation Pipeline over FY 2022-25 (Rs crore)
2.2 SECTORAL BREAK-UP
The aggregate asset pipeline over FY22-25 under
NMP is indicatively valued at Rs 6.0 lakh crore. The
overall sectoral contribution from FY 2022 to FY
2025 is shown in the Figure below. The top 5 sectors
(by estimated value) capture ~83% of the aggregate
pipeline value. These top 5 sectors include: Roads
(27%) followed by Railways (25%), Power (15%), oil
& gas pipelines (8%) and Telecom (6%). Roads and
Railways together contribute ~52% of the total NMP
value.
The assets and transactions identified under the NMP
are expected to be rolled out through a range of
instruments. The choice of instrument is determined
by the sector, nature of asset, timing of transactions
(including market considerations), target investor
profile and the level of operational and/or investment
control envisaged to be retained by the asset owner.20+ asset classes, 12+ line
ministries / departments
Top 3 sectors: Roads (27%)
Railways (26%) and Power
(15%) by value
Pipeline Phasing: 15% of
assets, value of Rs 0.88 lakh
to be rolled out in FY 21-22
Top 3 Asset classes: Toll
Roads, Railway Stations &
Transmission towers
13National Monetisation Pipeline Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 13vol-2_National Monetization Pipeline.indd 1317/08/21 12:11 PM17/08/21 12:11 PM Roads
27%
Railways
25%
Power
Transmission
8%
Power Generation
7%
Telecom
6%
Warehousing
5%
Mining
5%
Gas Pipelines
4%
Other Pipelines
& other assets
4%
Aviation
3%
Urban Real Estate
2%
Ports
2%
Sports Stadiums
2%
Figure 6: NMP – Share of sectors in terms of indicative monetisation value in NMP
2.3 PIPELINE PHASING
In terms of annual phasing by value, 15% of assets with an indicative value of Rs 0.88 lakh
crore are envisaged to be rolled out in the current financial year i.e. FY 21-22. As has been
explained previously, the aggregate as well as year on year value is only an Indicative
Monetisation Value and the actual realization for public assets owners will depend on the
timing, transaction structuring, investor interest etc.
In case of PPP augmentation or redevelopment, the actual capex investment towards
the assets is expected to be phased out over 2-3 year period post award. Accordingly,
the pipeline phasing below assumes the actual envisaged capex phasing as the year of
accrual of monetisation value.
14National Monetisation Pipeline Volume II: Asset Pipeline
vol-2_National Monetization Pipeline.indd 14vol-2_National Monetization Pipeline.indd 1417/08/21 12:11 PM17/08/21 12:11 PM 88190
162422
179544
167345
FY 22FY 23FY 24FY 25
Figure 7: Indicative value of the monetisation pipeline year-wise (Rs crore)
2.4 SHARE OF OVERALL ASSET BASE MONETISED
For any sub-sector, the scale of monetisation envisaged under the NMP (from FY 2022 to
FY 2025) is assessed in terms of “capacity/ volume of assets monetised
6
as a percentage
of the total capacity/ volume of asset held under public sector”.
Overall, as a strategy, the scale of monetisation under NMP has been envisaged based
on multiple factors and bulk of the asset base, will remain with the government. Further,
under the framework for core asset monetisation, the assets monetised will be handed
back at the end of transaction life.
Bulk of asset base will
still remain with the
Government
Even as significant private sector participation is being undertaken
for operation and maintenance of brownfield infrastructure
assets, bulk of assets continue to remain with public sector
entities. Further, the addition of new/greenfield assets using the
funds so raised continues to ensure significant share of public
sector entities in such sectors.
Scale of monetisation
is impacted by both
demand and supply
factors
While the monetisation scale, aggregated at the sectoral level,
presents a reasonably promising picture, any scaling up beyond
the identified levels could face the following demand- and
supply-side challenges:
Monetisation potential of toll road assets, though being a market-tested asset class with established monetisation models, is limited by the percentage of stretches having four-lane and above configuration. The total length of national highway (NH) stretches with four-lane and above is estimated to be about 23% of the total NH network
6 Defined in terms of the basic unit of asset. For example: length of roads in km (for road sector), number
of railway stations, circuit km (ckm) of transmission network (power transmission) etc.
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In case of thermal and gas-based power generation assets,
there could be a limited appetite from global investors
considering the overall aim to achieve net zero carbon
emissions by 2050, consequent targets set for investment
portfolios and a shift towards greater Environmental, Social
and Governance (ESG) compliance.
Volumes are
not necessarily
correlated to value
Volumes are not necessarily correlated to value. While, the
number of railway station assets considered for monetisation
under the NMP constitutes about 5% of the total number of
railway stations in the country, in value terms the railway
station re-development is one of the front-runner asset classes
contributing almost Rs 76,250 crore (12% of the total NMP value).
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Pipeline
3
Sector – wise Pipeline
17
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Summary
26,700 km20% Rs 1,60,200 crore 27%
Asset Length to
be monetized
Asset Length as
a percentage of
Potential Asset
Base (%)
Indicative
Monetisation
Value over FY
2022-2025 (Rs
crore)
Share in overall
NMP in value
terms (%)
3.1.1 Potential Asset Base
The Ministry of Road Transport and Highways is the central line ministry responsible for
development of National Highways. Works relating to National Highways are undertaken
under different central government schemes, such as the Bharatmala Pariyojana,
Development of Road in Left Wing Extremism affected areas, Special Accelerated Road
Development for North Eastern Region, Inter-Connectivity Improvement Programme, etc.
taking into account their impact on tourism potential, trade potential areas, strategic,
tribal, remote and border areas. The National Highways Authority of India (NHAI) is the
flagship central sector entity set up in year 1995 through an Act of Parliament, the National
Highways Authority of India Act, 1988. NHAI is responsible for development, maintenance
and management of National Highways entrusted to it. In the recent years, the Ministry
of Road Transport and Highways (MoRTH) have made impressive gains in pacing up the
award and construction of NHs every year. For example: the MoRTH reported an annual NH
construction of over 13,327 km during FY 2021, translating to an average of ~35 km/day.
The Potential Asset Base for roads sector includes aggregate National Highway (NH)
road length estimated at about 1,36,155 km
7
as on December 20, 2020. In terms of lane-
wise distribution of NHs as on March 31, 2019, of the total NH network, 23% (~31,067 km)
is comprised of four-laned roads
8
and above, 49% are two-laned roads, and the rest are
comprised of roads with less than two lanes. The NH construction is undertaken through
three modes viz. EPC, BOT and HAM. It is estimated that in recent years, majority of the
projects are being awarded through EPC and HAM mode and NHAI retains the tolling
rights over these stretches (and hence amenable for monetisation). The NH network of 4
lane and above configuration, where NHAI reserves tolling rights, has been considered as
amenable for monetisation for the purpose of identification of asset under NMP.
7 https://pib.gov.in/PressReleasePage.aspx?PRID=1684574
8 https://pib.gov.in/PressReleasePage.aspx?PRID=1575395
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Precedence of monetisation transactions and frameworks: Roads and highways,
as an asset class, has steadily developed a solid track record of monetisation. The
monetisation of operating road assets has generated growth capital for construction
of new roads under the Bharatmala programme, in line with the NHAI’s mandate to
diversify its funding for financing growth. Since 2017, the NHAI has been successfully
monetising its brownfield road assets through Toll Operate Transfer (TOT)-based PPP
concessions. The TOT model has since matured and is now an established model with
a model concession framework already in place. Another method of monetisation that
has seen traction in the recent past is the InvIT model. A number of road assets have
been monetised through InvITs by private sector players.
Evolved regulatory framework – The regulatory framework for roads sector especially
that for PPP Projects including the NHAI’s Model Concession Agreement, has
strengthened considerably over the last decade. Pursuant to enabling framework/
provisions by NHAI, multiple portfolio buyouts have been completed in the roads
sector unlocking capital and enhanced participation of institutional investors. Key recent
policy decisions and actions relating to BOT (Toll) Model, TOT Model and HAM taken
during 2020, which will further resolve impediments and enhance investor interest in
toll roads as an asset class are
9
:
i. Changes in Model Concession Agreement (MCA) of BOT (Toll) Project:
Considering the key challenges faced by stakeholders, changes in the BOT (Toll) framework have been undertaken keeping in mind the reforms related to project preparation and conditions precedents, dispute resolution and limitation of liability, ease of doing business, incorporation of new policies such as policy for harmonious substitution, policy for resolution of stuck projects etc. Also other miscellaneous reforms such as use of latest technology for traffic and road condition monitoring have been issued (Ministry’s OM No. NH-35014/25/2017-H dated 24.08.2020 and 25.08.2020).
ii. Changes in MCA of TOT framework: Change in the MCA of TOT Model allaying concerns of investors and stakeholders.
iii. Changes in MCA of HAM model: In order to address the issues relating to NH
Projects under Hybrid Annuity Mode (HAM) raised by stakeholders, changes in the provisions relating to change in ownership (exit option), shifting of utilities, maintenance during construction period, financial close, payment during construction period, applicable bank rate, mobilization advance, termination payment and dispute resolution etc. in the MCA of HAM have been made, and revised MCA of HAM incorporating these changes has been issued .
9 https://pib.gov.in/PressReleasePage.aspx?PRID=1684574
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electronic tolling, etc., and the palpable behavioural change seen in the adherence to
these initiatives, will usher in greater transparency in the asset management process
and significantly improve user “willingness to pay”.
This will result in asset aggregators with sound corporate governance practices, such
as Infra focussed PE funds, sovereign wealth funds, pension funds, etc., participating
in operational road assets with established base traffic
Thus, existing asset owners such as the NHAI will be able to effectively churn their
investments and perpetuate a virtuous cycle of “build, commission and monetise” to
generate growth capital for fresh investment
3.1.2 Assets considered for monetisation
The aggregate length of assets considered for monetisation over FY 2022 to 2025
aggregate to 26,700 km. This is based on the length of already/ to-be operational, four
lane highways and above in the country, entailing potential for revenue generation and
thereby monetisation.
The highways which will become operational over the NMP period have also been
considered as part of the monetisable asset base once these assets see a seasoning in
their performance viz. completion of one-two years of operations post establishment of
base traffic. Based on past trend in pace of award and construction, it is estimated that
NHAI every year is incrementally adding minimum of 2,000 – 3,000 km of monetizable
toll roads to its asset base every year.
The total length of highway assets considered for monetisation (26,700 km) constitutes
around 22% of the total NHs (estimated to be about 1,21,155 km) excluding the network
operated by private sector under BOT (Toll) based PPP concessions.
Approach to monetisation
Step 1 – Assets considered for monetisation
Both existing operational NH assets and new NH roads which are constructed and
operationalised over the next four years
10
have been considered. This is based on
the list of stretches received from the Ministry coupled with secondary research on
potential for monetizable four-lane and above assets.
The operational NHs constructed under EPC and HAM modes, especially in the 4-lane
and above category have been considered for monetisation. This includes both the
existing toll roads and potential toll roads to be added over the NMP period. As
10 This includes the under-construction road assets and the new roads to be awarded over the next 1-2 year
and getting monetized within the NMP period
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11
mode is
estimated to add up to ~16,387 kms
12
.
The total assets considered for monetisation over the 4 year period from FY 2022 to
FY 2025 aggregate to ~26,700 km.
Step 2 – Arriving at the indicative monetisation value.
The indicative monetisation value has been estimated based on the ‘Market approach’.
The multiple (in Rs crore per km) to estimate the indicative value is based on the
average blended factor at Rs 6 crore per km. The estimate has been arrived at based
on (i) recent TOT transactions
13
(ii) asset mix to be monetised (iii) scale of monetisation.
The average realisation by NHAI under past TOT concessions successfully awarded has
been in the range of Rs 9-14 crore per km. A lower range at Rs 6 crore per km has
been assumed to assess indicative monetisation value to factor in certain lower traffic
stretches in the portfolio and impact of scale on monetisation.
The annual monetisation value has been arrived at by multiplying the annual phasing
of assets considered for monetisation (in kms) and the multiple (in Rs. Crore per km)
3.1.3 Indicative Monetisation Value of assets and phasing
The total Indicative Monetisation Value of assets considered for monetisation is estimated
at Rs 1.6 lakh crore from FY 2022 to 2025. The asset pipeline has been phased out over
the NMP period to ensure better preparedness and improved marketability. The summary
of annual phasing is as follows:
Figure 8: Indicative value of Roads Monetisation pipeline (Rs crore)
11 The BOT (toll) projects awarded under the PPP mode have been excluded as tolling rights on these
assets are retained by the private sector for the respective concession periods and hence cannot be
considered a relevant part of this monetizable universe.
12 https://tis.nhai.gov.in/faq?language=en
13 TOT 1 was awarded at Rs. 14 crore per km, TOT 3 at Rs. 9 crore per km and the recent TOT 5 at Rs. 14
crore per km.
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In order to enhance NHAI’s resource mobilization, the Cabinet accorded the approval
and authorized NHAI to set up Infrastructure Investment Trust, as per InvIT Guidelines
issued by SEBI, to monetize completed National Highways that have a toll collection
track record of at least one year.
Background
!NHAI is in the process of monetising its completed and operational highway
projects under the Infrastructure Investment Trust route to mobilise additional
financial resources through the capital markets.
!NHAI InvIT has been set up with the objective of monetising its selected completed and operational NH projects through alternative sources such as capital markets and diversification of its investor base.
!Selected operational portfolio of projects will be held through an SPV. SPV thus constituted is envisaged to execute a concession agreement with the NHAI for the said projects.
!NHAI InvIT issue is envisaged to be privately placed. Indicative value of the NHAI InvIT fund raise from the current tranche underway is about Rs 5,000 crore. The fund-raise and issue listing is expected to be completed during FY 22 subject to market conditions and stabilisation of toll revenues in wake of covid.
Key features
!The first tranche of InvIT are expected to consist of ~586 km of NH assets in Rajasthan, Gujarat, West Bengal, and Bihar. A second tranche of follow on issue of the InvIT is also being explored by NHAI.
!A new entity wholly-owned by the NHAI, the National Highways Infra Investment Managers Private Limited (NHIIMPL), has been incorporated to act as the Investment Manager under the proposed InvIT transaction.
!The InvIT activities will be managed by the Investment Manager entity, NHIIMPL, which has been staffed with a team of competent industry experts.
!The Board of the Investment Manager comprises independent directors and professionals with extensive private sector experience in operational road assets/capital market-related transactions/fund management. This is critical to ensure the functioning of the NHIIMPL with a reasonable level of independence for the benefit of investors, thereby offering them requisite comfort.
Key timelines and way ahead
!SEBI in-principle approval for registration of NHAI InvIT was obtained in June 2020.
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!Project Manager and Investment Manager have been incorporated in September
2020.
!Concession Agreement between the SPV and NHAI has been approved in February 2021.
!Marketing and investor consultations – ongoing
!The first tranche of NHAI InvIT transaction is expected to be completed by Q2/Q3 of FY2022 subject to market conditions and stabilisation of toll revenues in wake of covid.
The indicative transaction structure of NHAI InvIT is provided in the figure below.
Sponsor (NHAI)Unit Holder
NHAI InvIT
SPV
Project 1 Project 2 Project 3
Investment
Manager
Trustee
Project Manager
Merchant
Banker
Project n
UnitsUnits
100%
Figure 9: Region-wise key stretches included in the pipeline over FY 2022-2025
Detailed list of stretches is set out in Annexure I.
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Summary
Rs 152,496 crore26%
Indicative Monetisation Value
over FY22-25
Share in overall NMP in value
terms
Key assets for monetisation over FY22-25 (% of Potential Asset Base)
Railway stations400 Nos. (5.5% of stations)
Passenger trains90 Nos. (5% of total trains)
Railway track1 route of ~1,400 km (2% of network)
Konkan Railways741 km
Hill Railways4 Nos. , 244 km route
Railway owned Good-sheds 265 Nos. (21% of total good sheds)
DFC track and allied
infrastructure
673 km (20% of total DFC network)
Others–Railway colonies
and stadiums
15 Railway stadiums & selected Railway Colonies
3.2.1 Potential asset base
Indian Railways (IR) is the fourth-largest railway network in the world by size, with 121,407
km (75,439 mi) of total track over a 67,368 km route. With IR’s focus on augmenting
railway infrastructure to facilitate freight and passenger movement, significant investments
will be needed to address capacity constraints. The Potential Asset Base considered
includes assets owned and operated under the Ministry of Railways (MoR) (including
identified PSUs and entities under MoR). The key assets across categories relevant to the
monetisation process are shown in the table below.
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14
S.NoAsset classValue
1 Railway stations7,325 nos.
2 Passenger trains13,169 nos.
3 Track infrastructure
(route length)
67,956 km
4 Existing Railway owned Goods sheds 1,246 nos.
5 Hill railways5 nos.
6 Total length of Eastern & Western Dedicated Freight Corridor
(DFC), excl. Sonnagar Dankuni section on PPP mode – target
date of commissioning is June 2022
15
2,843 km (Eastern –
1337 kms, Western
– 1506 kms)
Factors influencing monetisation of asset classes:
High commercial potential of the assets and a massive footprint – IR assets (especially
railway stations, MFCs, goods sheds, etc.) are typically centrally located in prime
locations having high commercial potential due to the presence of such assets in
key urban centres or strategic significance (e.g. access to key logistics corridors and
providing last-mile hinterland connectivity). This commercial potential remains largely
underutilised and is expected to whet investor appetite.
Dedicated institutional arrangements to drive the monetisation agenda –Railway
station development agenda lies at the heart of the sector’s monetisation drive. The
presence of a dedicated SPV – Indian Railway Stations Development Corporation
(IRSDC)
16
along with RLDA – to develop new stations and redevelop existing Indian
railway stations helps streamline the process.
PPP Framework: In order to standardise PPP framework for Railway Projects, model
concession agreements (MCA) for various projects viz. station redevelopment, private
passenger train etc have been developed. This is to provide a balanced risk sharing
framework and thereby ensure predictability and bankability of transactions. Similar
frameworks and documents need to be developed for brownfield PPP models such
as OMD and TOT-based concessions for other railway assets identified under NMP.
Mechanisms to address asset-specific challenges important to scale up monetisation
– The key impediments to the monetisation process are asset-specific challenges
(e.g. presence of an identifiable revenue stream) and measures to help private sector
manage risks effectively. This is specifically relevant to the railway sector, which has
seen limited penetration of PPPs as a mode of project delivery. Key asset classes and
the influencing factors include the following:
14 http://indianrailways.gov.in/railwayboard/uploads/directorate/stat_econ/Annual-Reports-2019-2020/
Year-Book-2019-20-English_Final_Web.pdf
15 https://dfccil.com/Home/ProgressStatusImage accessed on May 28, 2021
16 IRSDC is a joint venture between IRCON and RLDA with a 51:49 equity shareholding ratio
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aKonkan Railway – Multiple stakeholders, including state governments, own
stake in the entity. Hence, existing shareholder interests need to be managed
effectively before shaping the monetisation transaction structure.
aTrack, OHE – The track infrastructure presently is majorly for exclusive and
captive use of Indian Railway operations with earnings coming in form of passenger and freight income. At present there is no concept of apportionment of a track access charge towards use of track. A monetisation mechanism will need to structure an infrastructure access and usage agreement along with ringfencing a Track Access Charge based revenue regime.
aPrivate Passenger Trains – Bidding for 150 trains is presently underway and
the project is expected to be awarded in FY 22, any scaling up effort will be based on successful award and experience from the current batch of PPP clusters.
Clearly identified project pipeline – The NIP and the Draft National Rail Plan (NRP)
2020 provide a detailed asset-level plan for the development of the railway sector. The NIP envisages a total capex of Rs 13.7 lakh crore by both the centre and states over FY 2022-25, of which Rs 1.6 lakh crore is envisaged through the PPP mode. The Draft NRP 2020 provides a strategic direction to the sector for the next 30 years, which includes an increase in the modal share (freight) of railways from 26% to 45%, while continuing to provide best-in-class services for passengers.
3.2.2 Assets for Monetisation
The railway assets considered for monetisation over FY 2022-25 are as explained below.
Table 3:
Railway assets considered for monetisation
S.No. Asset type FY22 FY23 FY24 FY25 Total
1
Railway station
development
40 stations
120
stations
120
stations
120 stations
400
stations
2
Passenger train
operations (PTO)
— 30 trains 30 trains
30 trains 90 trains
3 Track – OHE InvIT — 1,400 km —
— 1,400 km
4 Good Sheds— 75 nos. 100 nos.
90nos. 265 nos.
5 Konkan Railway — — 741 km
— 741 km
6 Hill Railways 2 nos. 2 nos. —
— 4 nos.
7
Dedicated Freight
Corridor
— — 337 km
337 km 673 km
8 Railway Stadiums 3 nos. 5 nos. 5 nos.
2 nos.
15
stadiums
9 Railway Colonies — — — —
Numbers
not
provided
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Railway station redevelopment
!Assets considered for monetisation – The number of railway stations taken up
for monetisation was arrived at based on GoI’s Railway Station Redevelopment
Program which envisaged redevelopment of 400 railway stations identified by
Ministry of Railways. The railway stations were divided into three categories (Tier 1:
50 stations, Tier 2: 100 stations, and Tier 3: 250 stations) based on the commercial
potential and potential scale of development.
!Indicative Monetisation Value – It has been arrived at based on Capex approach, i.e., the capital cost towards the redevelopment of railway stations. The capital cost per railway station was arrived at based on the estimates for 97 railway stations identified under the Draft NRP 2020. The median capex per railway station is around Rs 400 crore. With this as the base, capex per railway station for the three categories of assets was estimated as follows: Tier 1 – Rs 500 crore per station, Tier 2 – Rs 300 crore per station, and Tier 3 – Rs 85 crore per station.
Passenger train operations
!Assets considered for monetisation – The number of projects to be taken up for
monetisation is based on ongoing tenders and proposed plans of IR. Bidding for first set of clusters envisaging ~150 passenger trains to be operated by private operators across 12 clusters and 109 O-D pairs of routes is presently underway. The project is currently under bidding stage and the concession is expected to be awarded in FY 2022. These trains are expected to be introduced in a phased manner over FY 2023-25 period. Of these, ~60% of trains (~90 trains) are expected to be operationalised and deployed during NMP period i.e. FY22-25.
!Indicative Monetisation Value – It has been arrived at based on Capex approach
– capital cost towards acquisition of rolling stock plus an additional mark-up towards establishment and other PPP incidentals have been assumed. Additional revenue streams that may accrue to the Railways in form of revenue share and upfront premium if any under the PPP mechanism has not been included in the monetisation value.
Track, signalling, and Overhead Equipment (Track OHE) InvIT
!Assets For monetisation –The objective of proposed framework is to monetise existing railway infrastructure i.e. track, signalling, OHE etc across defined railway routes as a packaged asset. These railway infrastructure assets are currently utilised by IR with a potential for private sector operators also joining the fray in the near future. The monetisation of one major O-D route is envisaged under the NMP as a pilot project, which would serve as the framework for other profitable routes.
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!Indicative Monetisation Value – It has been arrived at based on EV approach by
carrying out a DCF based cashflow projection for a period of 25 years factoring
in assumptions and available data on assumed Track Access Charge, number of
trains plying, operating cost and renewal expenses. The same is only an indicative
number at this stage and the detailed valuation may be carried out at the feasibility
and transaction structuring stage. Further, for the purpose of NMP, it has been
assumed that during the NMP period, about 85% of the units of the proposed
InvIT will be divested and a proportionate enterprise value has been assumed.
Private Freight Terminals (PFTs)
!Assets For monetisation – As per Draft NRP 2020, IR manages 1,246 railway-
owned goods sheds. It is envisaged that the assets in major locations (especially in and around major urban centres), totalling 265 nos. (i.e. 21% of total good sheds), may be monetised by inviting private sector participation in augmentation & O&M of these good sheds as private freight terminals.
!Indicative Monetisation Value – It has been arrived at based on capex approach. The NRP lays out an investment plan of Rs. 10,402 crore for developing around 170 greenfield terminals, translating to ~Rs. 60 crore per terminal. Considering the level of capex for upgradation of existing facilities is relatively low, a capex of about Rs. 21 crore per good shed has been derived and considered for arriving at indicative monetisation value. The 265 good sheds considered for monetisation have been phased out over the NMP period starting with 75 good sheds in FY 23.
Monetisation of track and allied infrastructure of Dedicated Freight Corridor of
DFCCIL
!Assets For monetisation – Based on current DFCCIL capex plans, it is estimated
that 2,843 km of DFCCIL corridors (excluding the PPP section) are expected to
be fully commissioned by June 2022
17
. Once fully commissioned, it is assumed
that DFCCIL will monetise ~673 km of track (either by way of grant of TOT like
concessions to private players or through InvIT transaction with revenue in form
of Track Access Charge) starting from FY 2024 onwards.
!Indicative Monetisation Value – Since detailed traffic and revenue projections for DFCCIL are not available at this stage, the indicative monetisation value for DFCCIL has been arrived at based on the Book Value approach i.e. taken at capital cost towards construction of existing DFCCIL corridors. The capital cost per km was estimated at Rs 30 crore (adjusted for land cost) based on ongoing capex costs.
Other assets: Konkan Railway, Hill Railways, Railway Stadiums and colonies
!Assets for Monetisation – The specific assets considered for monetisation have been selected based on the following factors: (i) profitability of routes, (ii) potential
17 https://dfccil.com/Home/ProgressStatusImage
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Railways networks), (iii) potential for improved O&M standards and utilisation of
sports stadiums.
!Indicative Monetisation Value – It has been arrived at based on EV approach for
Konkan Railway and capex approach for Hill Railways and Railway stadiums. For Railway colonies and stadiums, Capex data provided by Ministry of Railways has been considered for inclusion in the pipeline.
3.2.3 Indicative Monetisation Value of assets and phasing
The Indicative Monetisation Value is estimated at Rs 1,52,496 crore over the NMP period FY2022-25. Asset-wise phasing and values are provided in the table below.
Table 4 : Asset-wise phasing of monetisation value (Rs crore)
S.No. Asset typeFY22 FY23 FY24 FY25 Total
1 Railway station development 17,000 29,325 17,575 12,350 76,250
2 Passenger train operations — 7,002 7,212 7,428 21,642
3 Track – OHE InvIT— 18,700 — — 18,700
4 Good Sheds— 1,575 2,100 1,890 5,565
5 Konkan Railway— — 7,281 — 7,281
6 Hill Railways460 170 — — 630
7 Dedicated Freight Corridor — — 10,089 10,089 20,178
8
Railway Colonies
redevelopment
350 450 650 800 2,250
TOTAL 17,810 57,222 44,907 32,557 1,52,496
The figure below depicts the annual phasing of the assets by total value generated.
Figure 10: Pipeline phasing – Railway assets (Rs crore)
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A. S<> tation Redevelopment Programme
Redevelopment of railway stations across India is a priority agenda of Ministry of Railways,
Government of India. Indian Railways has initiated the redevelopment of railway stations
with the primary objectives of providing world class passenger amenities, making them
hubs of economic development and re-establishing them as the nerve centres of cities.
This initiative is being driven by the Government with the participation of private players as
a part of PPP projects. This is envisaged to be achieved through leveraging the commercial
development opportunity of land and air space surrounding the station and to create
seamless travel and facilities experience to passengers with the aim to future-proof these
important travel nodes.
Salient features and key locations
B. Priv<> ate participation in Passenger Train Operations
Indian Railway (IR) has launched the project to invite private participation in running of
passenger trains over its network. Indian Railway (IR) is one of the world’s largest railway
systems and the passenger business is estimated to be worth $ 7.5 billion annually. The
passenger demand for IR is robust as it has withstood long term modal shifts and has
consistently reported unserved demand levels of ~15% in form of waitlisted passengers.
The cluster of projects identified envisages private train operations on ~109 pair of routes
structured as 12 clusters with a targeted private investment of Rs. ~30,000 crore. The
project will incrementally add over 150 modern trains to the IR system. The clusters in the
current set of packages being bid out are dense demand routes and include Delhi-Mumbai,
Delhi-Chennai, Mumbai-Chennai among others. The Model Concession Agreement guiding
principles for the private passenger train operations has already been developed. Based
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more routes in future.
The bidding process for a batch of 12 clusters has been undertaken.
Salient features and clusters in the Private Passenger Train Operations project
3.2.5 Overview of other railway assets
This section comprises of an overview of other railway asset classes that have been
identified and included in the pipeline. Some of these transactions are in the preparatory
stage hence the structures and modalities for monetisation are indicative in nature and
may evolve based on detailed transaction due diligence.
A. T<> rack, Signalling, and Overhead Equipment (OHE) infrastructure
Indian Railways (IR) with its network of over 67,000 route kms is the world’s fourth largest railway network in terms of size. Ministry of Railways may explore monetisation of its operating track infrastructure bundled with signalling and OHE/ TRD (Traction & Distribution) assets for selected origin-destination (O-D) pair through a structured financing mechanism. InVIT based structure may be explored for monetisation of this asset class. Besides, monetisation of track infrastructure, improvement in operating efficiency in long term is one of the key objectives guiding the transaction.
Table 5 :
Snapshot of Indicative Transaction structure
Asset Bundle
Track infrastructure bundled with signalling and OHE/ TRD assets
(specified assets) for a selected origin-destination (O-D) pair
Indicative
monetisation
instrument
Infrastructure Investment Trust
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Structure
Creation of an SPV for holding long term rights to earn Track
access charge (TAC) revenue from IR for the specified asset bundle
SPV’s TAC revenue stream to be monetised by creation of an InvIT sponsored by IR, units of InvIT divested under a private placement/public listing
Maintenance payments (for routine/major upgrades to be borne by the SPV on pre-defined terms)
Project manager may undertake O&M by subcontracting to IR
Revenue model
Pre-determined Track Access Charges (TAC) (Rs per train km) paid by IR to the SPV
Traffic guarantee from IR may be explored to provide predictability of operating environment to SPV
O&M charges paid
to IR by SPV
O&M responsibility of the asset bundle retained by IR who is
appointed as the Project Manager by the InvIT
Fixed annual amount, which may be escalated at a pre-specified rate
A variable component may be linked to performance and efficiency
Pre-specified outgo may be apportioned towards renewal and major maintenance expenditure
Status
Transaction Structuring underway
The structure enables IR to tap domestic and foreign long-term capital at competitive
cost of funds. Divestment of units of the InVIT provides upfront capital proceeds to IR
as the sponsor, O&M expenses as sub-contracting revenue, and dividend income on the
residual equity holding in InvIT. TAC (Track access charge) linked to utilisation incentive
and availability. The figure below provides an overview of the transaction structure.
Figure 11: Monetisation of Track OHE infrastructure – indicative transaction structure
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Multi Modal Logistics Hubs
IR allows PFTs on railway land adjacent to stations with a view to utilising vacant land
parcels better, increasing PPP investments, and boosting freight revenue. Commercial
viability of private terminals is higher in case of terminals’ proximity to cement industries,
ports, and power plants, which are key consumption centres. At present, private freight
terminals are built by private investors on private land, and connectivity is provided by
railways to the operators on lease.
During October 2020, Ministry of Railways issued a Policy
18
on Development of Goods
sheds aiming at augmenting terminal capacity through private participation by allowing
setting up of new goods-shed facilities and developing existing railway owned goods-
sheds at a larger number of stations.
Salient features of the Good Sheds Policy of IR
Private parties permitted to develop goods wharf, loading/unloading facilities, facilities
for labour (resting space with shade, drinking water, bathing facilities, etc) approach
road, covered shed and other related infrastructure. The facilities are to be created/
developed through the private investment.
Developments for the proposed facility to be as per approved Railway designs,
standards and specifications.
The facilities created by the private party shall be used as common user facility, and
no preference or priority will be granted to the traffic of the party over the traffic of
other customers.
Responsibility for maintenance of assets and facilities created shall be vested with the
party during the agreement period.
Incentives under the scheme: Share in the Terminal Charges (TC) and Terminal Access
Charges (TAC), as the case may be, for all the inward and outward traffic dealt at the
goods-shed for five (05) years, from the date of completion of the work.
The party seeking the least share (TC/TAC) to be selected through competitive bidding.
Additional revenue–utilization of available space for establishing small canteen/tea-
shop, advertisements, etc.
C. Hill R<> ailways
The Mountain railways of India consists of fully functional and operational railways networks in mountains and hilly terrains in India. The key assets are: Darjeeling Himalayan Railway located in the foothills of the Himalayas in West Bengal, the Nilgiri Mountain Railways located in the Nilgiri Hills of Tamil Nadu, the Kalka Shimla Railway located in the Himalayan foothills of Himachal Pradesh and the Matheran Railway located in Maharashtra. These locations are domestic tourism hubs with a heritage based appeal to these railways.
18 https://pib.gov.in/PressReleasePage.aspx?PRID=1664798
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infrastructure may require rehabilitation and augmentation investment. The station and
adjoining real estate on the Railway land may be bundled along with train operations to
bring in viability and commercial attractiveness. Snapshot of a PPP based transaction
structure is as below.
Snapshot of Indicative Transaction structure:
D. Dedicated Freight Corridor (DFC)
DFCCIL, an SPV, was established in 2006 under the administrative control of the MoR
to undertake planning, development, mobilisation of financial resources, construction,
maintenance, and operations of Dedicated Freight Corridors (DFCs). The two DFCs under
implementation – Eastern and Western – are being funded through a mix of equity from
the MoR and loan from multilateral development banks – the World Bank and the Japan
International Cooperation Agency (JICA). These two DFCs, with an estimated project
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funded through (a) JICA loans (47%), (b) World Bank loans (17%), and (c) the MoR’s
equity contribution (36%). The Western DFC is primarily funded through loans from the
JICA and equity from the MoR, whereas the Eastern DFC is being funded through loans
from the World Bank and equity from the MoR. DFCCIL is planning to develop a section
of the Eastern DFC (Sonnagar-Dankuni) via the PPP mode.
In terms of revenue model, the key customer of DFCCIL would be IR, with DFCCIL earning
revenue through a TAC mechanism. IR would decide the trains that would run on the DFC
network. Freight booking would be done through IR, which would then assign traffic to
the DFCs. TAC would be determined by DFCCIL in a way that it covers fixed and variable
components of providing and maintaining track infrastructure.
Overview of Eastern and Western DFCs
The Western DFC project comprises 1,504 km of a double-line electrified track from JNPT
to Dadri via Vadodara-Sanand-Palanpur-Phulera-Rewari. The alignment is kept parallel
to existing lines, except provision of detours. The Western DFC is entirely on a new
alignment from Rewari to Dadri and also from Sanand to Vadodara. This new line portion
is designed to connect with the existing New Delhi-Mathura line at Asaoti railway station
from Pirthala station of DFC. Moreover, the Western DFC is proposed to join the Eastern
Corridor near Dadri.
Traffic on the Western Corridor mainly comprises ISO containers from JNPT and Mumbai
Port in Maharashtra, and ports of Pipavav, Mundra, and Kandla in Gujarat destined for ICDs
located in northern India, especially at Tughlakabad, Dadri, and Dhandari Kalan. Besides
containers, other commodities moving on the Western DFC are POL, fertilisers, foodgrains,
salt, coal, iron & steel, and cement. Further, owing to its faster growth than other
commodities, the share of container traffic is expected to increase progressively. The
maximum number of trains in the section is projected at 230 (both in UP and DN) in the
Ajmer-Palanpur section in 2024.
The Eastern Corridor, with a route length of 1,861 km, consists of an electrified single-line
segment of 401 km between Ludhiana and Khurja and an electrified double-line segment
of 1,460 km between Khurja – Kanpur–Mughalsarai – Sonnagar- Dankuni.
Traffic on the Eastern Corridor is mainly dominated
by coal for power plants in the northern region of
Uttar Pradesh, Delhi, Haryana, Punjab, and parts of
Rajasthan – from coal fields situated in eastern part
of the country, finished steel, foodgrains, cement,
fertilisers, and limestone to steel plants and general
goods.The number of trains with axle load of 25
tonne works out to a maximum of about 163 in the
UP and DN direction in the Sonnagar-Mughalsarai
section of the Eastern Corridor.
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To attract large commercial investors, monetisation strategy for dedicated freight corridors
would need to be designed along with ground work for monetisation of assets such as
feasibility studies, transaction structuring and assessment of commercial potential. Once
the project is substantially commissioned and there is visibility of revenue model, suitable
models may be adopted. Two potential instruments may be explored for monetisation
of dedicated freight corridor; InVIT and Carry Operate Transfer (COT) Concession. The
target date of commissioning of the project is June 2022 with certain sections slated to
be commissioned by December 2021. Certain sections of WDFC and EDFC have been
commissioned already. Monetisation of the freight corridors in phases may accordingly
commence post commissioning.
Indicative Transaction structure and terms under a COT Concession
Authority Ministry of Railways / DFCCIL
Concessionaire Scope
Grant of a Carry Operate Transfer (COT) concession for
operation and maintenance of Eastern and Western Dedicated
Freight Corridors in separate packages
Concession Period
50-60 years
Revenue
TAC (to be indicated under the Concession Agreement) with pre-specified indexation mechanism
Traffic
Minimum traffic guarantee may be explored (as a % of existing traffic)
Monetisation
consideration
Monetisation value may be paid upfront (or in installment)
Additionally, Revenue sharing mechanism from additional traffic
over minimum traffic guarantee may be specified as per pre-
specified percentage
Authority support
Minimum traffic guarantee
Approval for non-IR freight trains
Reasonable support for approvals/clearances
Selection process
Eligibility: threshold financial capacity (minimum net worth, annual revenue, profitability, etc.)
Open competitive bidding process similar to PPP projects
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Key terms
Asset Bundle OR Right to operate, maintain and earn revenue from such
assets transferred under an InvIT
An SPV may be created sponsored by MoR/DFCCIL
Fixed term of 50-60 years (Assets to be transferred to MoR/DFCCIL at end)
Appointment of Trustee, Investment Manager, Project Manager as per SEBI regulations
Units of InvIT divested under a private placement/public listing (15% for at least 3 years; possibility of higher holding)
Professional Project Manager should undertake the O&M
Minimum Traffic Guarantee by Authority (As percentage of Existing Traffic) may be explored
Table 6 : Comparative assessment of COT Vs InVIT Models for monetising Freight
Corridor
Carry, operate and transfer
(COT)
InvIT
Lead time for
Monetisation post
commissioning
May be monetised as soon
as a particular stretch is
operationalMay need to establish 1 year of
operational history as per SEBI
regulations
Target Investor category
Infrastructure focussed
investors / developers and
funds
Both public listing and private
placement possible; possibility to tap
retail investors in public listing
Valuation driver Premium for controlPremium for liquidity
Future Cashflows for
Authority
Revenue share to capture
windfall gainsDividend against holding of MoR/
DFCCIL
Phased addition of assets
Through grant of
standalone PPP concessions
Possible by way of future offerings
by the InVIT
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Summary
28,608 ckt km 17% Rs 45,200 crore 8%
Asset base
considered for
monetisation over
FY22-25
Asset planned for
monetisation as %
of asset base over
FY22-25
Indicative value
over FY22-25
Share in overall
NMP in value
terms
3.3.1 Potential asset base
India’s economic growth hinges on rapid growth in the energy sector. Energy consumption
in the country has almost doubled since 2000 and is set to grow further. This calls for
huge investments in infrastructure creation and augmentation over the next few years.
As of March 31, 2019, the transmission asset base (in terms of network length) in India
aggregated to a total length of 4,13,407 circuit kilometre (ckm), growing at a healthy
CAGR of 7% since 2015. The shares of the Centre, States and private sector in the overall
length of the transmission lines were 38%, 54%, and 8%, respectively.
The potential asset base considered for NMP under power transmission asset class is the
transmission infrastructure of the nodal central transmission utility, Power Grid Corporation
of India Ltd (PGCIL). As of September 2020
19
, PGCIL owned and operated about 1,68,140
circuit kilometre (ckt km) of transmission lines and 252 sub-stations, with an aggregate
transformation capacity of 419,815 MVA. Of the total transmission network, 93% was
400 KV and above. PGCIL owns inter-state transmission assets comprising of both the
regulated tariff mechanism (RTM) and tariff-based competitive bidding (TBCB) modes.
The bulk of the PGCIL’s assets (to the extent of about 95%) belong to the regulated
assets category, viz. RTM which works on a cost-plus model providing for an assured
return on equity and cost recovery through the tariff fixed by the regulator over 5 year
control periods.
19 https://www.bseindia.com/downloads1/Powergrid%20Infrastructure%20Investment%20Trust_DOD.
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20
Being a critical link in the power sector value chain, the transmission sector needed
more attention to cater to the growing power demand and the increasing generation
capacity. Investments in the form of budgetary allocations, internal accruals and public
sector undertakings (“PSU”) borrowings were unable to fund this growing need.
Keeping this in mind, the Electricity Act permitted competition in the power sector,
including in the power transmission sector.
The policy framework for TBCB projects was introduced in 2011, which required for
most transmission network development at the Centre to take place through the TBCB
route unless for exceptions created under the policy necessitating RTM as a mode.
Ministry of Power (MoP) constituted the National Committee on Transmission (NCT) to
identify inter-state transmission projects to be developed through competitive bidding
and to oversee the process of competitive bidding. Ministry of Power has also issued
standard bidding documents, such as request for qualification (“RFQ”), request for
proposal (“RFP”), transmission service agreements and share purchase agreements,
and also appointed PFC Consulting Limited and REC Transmission Projects Company
Limited as the bid process coordinators (each, a “BPC”) for carrying out the bidding
process.
Under TBCB mechanism, projects are bid for under a build, own, operate and maintain
(“BOOM”) model as per standard bidding documents notified by the MoP, which
comprises a request for proposal and request for qualification and standard format
of transmission agreement and share purchase agreement. The annual transmission
charge for a 35-year period is discovered through this bidding process.
In the power sector, an estimated total capital expenditure of Rs ~14 lakh crore is envisaged
by both the Centre and states over FY 2020 to 2025. As per NIP, an estimated total capital
expenditure of Rs. ~3 lakh crore would be incurred on electricity transmission projects over
financial years 2020 to 2025. In the transmission segment, PGCIL is undertaking major
projects such as HVDC Bipole Link between western and southern regions, interstate
Green Energy Corridor Transmission Link and construction of substations. Monetisation
of seasoned transmission assets could help finance creation of new infrastructure, by
bringing in much-needed capital.
Factors influencing monetisation of the asset class
Consistent and stable cash flows from assets with long-term visibility and low
counterparty risks: Revenue for electricity transmission is generated from contracted
transmission charges under long-term Transmission Service Agreements (TSAs), with
a low level of operating risk and an availability-based payment mechanism. The recent
PGCIL InvIT was backed by TBCB assets where the transmission charges are fixed for
a period of 35 years, providing stability, consistent cash flows, and long-term visibility.
20 Powergrid InvIT filing document
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The transmission sector in India has witnessed increased participation of both large
domestic and institutional investors, owing to the stability of asset class and availability
based business model.
Stable availability and robust asset profile of transmission assets:
!Inter-state power transmission projects receive transmission charges on the basis
of availability, including in case of outage due to a force majeure event, subject to
requisite approvals and irrespective of the quantum of power transmitted through
the system
!The availability for transmission projects was above 98% in the first nine months
of FY 2021, and the operations of these projects were unaffected as they are
classified as essential services making transmission a resilient asset class
3.3.2 Assets considered for monetisation
The transmission assets considered for monetisation over FY 2022-25 are ~28,608 circuit
(ckt). This includes PGCIL’s transmission assets of 400 KV and above. The total assets for
monetisation constitute around 17% of the total asset base of PGCIL.
aFY 2022 : During FY22, –Transmission assets considered with indicative value of Rs 7,700 crore. Assets to be monetized during FY22 includes the PGCIL’s InvIT issue transaction for which has already been concluded during Q1 of FY22.
aFY 2023, FY 2024 and FY 2025 –Aggregate length of 23,734 ckt kms has been considered for monetisation during this period.
Approach to monetisation
In the case of power transmission assets, the assets considered for monetisation (in ckt kms) and the indicative monetisation value (Rs crore) over FY22-25 are arrived at based on the following steps:
Step 1 – Asset considered for monetisation
!Out of the total transmission asset base of PGCIL, the scale of transmission assets with
capacity of 400 KV and above (1.56 lakh ckt kms) was estimated. The monetisation
potential is available in this category of long-distance transmission assets. This
includes a mix of TBCB and RTM assets. While most TBCB assets of PGCIL are expected
to be bought under the PGCIL InvIT over a period of time, inclusion of additional
assets from RTM category is critical to achieve the required scale in monetisation.
!The transmission assets considered for monetisation over FY 2022-25 depend on factors such as transmission charges, asset availability, and asset mix. The total transmission assets for monetisation are considered at ~28,608 ckt kms.
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!A Market approach has been adopted to determine indicative monetisation
value. Reference valuation (in terms of Rs crore per ckt km) has been taken with
reference to PGCIL’s recently closed InvIT. The indicative monetisation value of
the transmission assets has been considered based on a factor of Rs ~1.58 crore
per ckt km. It may be noted that this is only an indicative value and the actual
realisation and valuation would depend of factors such as asset profile, transaction
structure and market conditions.
3.3.3 Indicative Value of assets and phasing
The total value of assets considered for monetisation is estimated at Rs 45,200 crore
over FY 2022-25, as follows:
7700
7500
1500015000
4873
4747
94949494
4000
6000
8000
10000
12000
14000
16000
FY22FY23FY24FY25
Value (Rs crore) Assets (ckm)
Figure 12: Pipeline phasing – power transmission (Rs crore)
3.3.4 Marquee projects
A. Monetisation of Transmission assets of POWERGRID through InvIT
Key features of the InvIT:
—The PGCIL InvIT has been set up with the objective of monetising its completed and operational transmission projects through alternative sources such as capital markets and by diversifying its investor base
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—Union Cabinet approved monetisation of assets of POWERGRID, through
Infrastructure Investment Trust (InvIT) model in September 2020. This is the
first InvIT by a PSU.
—Pursuant to the Cabinet approval, POWERGRID monetised its 5 high voltage transmission assets held by POWERGRID in form of Special Purpose Vehicles (SPVs) with an aggregate gross block of Rs. ~7,220 crore as on March 31, 2020.
—The InvIT will initially have IPAs, comprising five power transmission projects located across five states of India
—The projects comprise 11 transmission lines, including six 765 kV transmission lines and five 400 kV transmission lines, with a total circuit length of ~3,700 ckt km, and three sub-stations with 6,630 MVA of aggregate transformation capacity and 1,956 km of optical ground wire
—Each of the IPAs has in place a long-term TSA of 35 years from the scheduled COD of the relevant IPA
—Upon expiry of the term of a TSA, the relevant IPA can apply to CERC for renewal if it is not unilaterally extended by CERC
—There is high visibility of potential revenue and cash flows from the InvIT due to availability of additional 18 projects involving an investment of Rs 22,500 crore to be offered as a “project pipeline” to the InvIT
Figure 13: Proposed structure – PGCIL InvIT
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Cost-plus or RTM assets are based on regulated return or cost-plus tariff models, involving
regulated returns on invested equity and are set by the regulator at intervals of 5 year
control periods. Typically, such assets are housed in the parent entity’s balance sheet
and not under separate SPVs. Monetisation for such assets hence may require a scheme
of arrangement / demerger process which may pose associated transaction overheads
such as continuation of tax holiday on assets, capital gains tax, stamp duty etc., due to
asset transfer.
The government vide the Finance Act, 2021 has amended various sections to make the
reorganisation of a PSU into separate companies a tax-neutral transaction. With the
Finance Act, 2021, the government has effected amendments to the Section 47 of the
Income Tax Act which allows for transfer of capital assets by a PSU to another notified
public sector company, central government or state government to not be regarded as
transfer. Such transfer shall be under a plan approved by the central government.
Strategy for monetising RTM assets
In order to effect value unlocking, carving out the revenue rights on these
assets to a separate SPV by way of a special demerger may be explored
as the investors value completed projects differently than the portfolio of
assets in the balance sheet which also includes under construction risks and
corporate risks. Tax efficiencies can be brought in by structuring of transaction
as revenue rights as against transfer of assets into an SPV.
Demerged SPV may be assigned rights to receive transmission charges as against asset. Since ownership does not change hands, stamp duty impact can be minimized.
Regulator’s consent and lenders’ approval would need to be obtained prior to transaction process
80 (I) a: Impact can be minimized by choosing assets which have minimal negative impact on valuation or 80 (i) a benefit has been exhausted substantially
A monetisation model similar to the toll-operate-transfer (TOT) model may also be
explored for successful monetisation of RTM transmission assets. The TOT model has
been conceptualised by MORTH for undertaking the monetisation of operational toll road
projects. This model focuses on income yielding assets with established cash flows, and
there is no transfer of ownership of assets from the Authority to the Concessionaire. The
concessionaire retains the revenues and is responsible for undertaking O&M obligations
only, and this model does not involve the concessionaire assuming any construction risk.
Besides, capacity augmentation, if required, is undertaken by the Concessioning authority
at its own cost. Certain distinctions however exist between statutory bodies such as
NHAI (which has in recent past adopted the TOT model) and PSUs such as PGCIL which
functions as a corporate. The key aspects which need to be considered for adopting a
TOT based model for RTM transmission assets are:
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Regulatory
Can enter into concession
agreements
Does not have regulatory powers/authority
to grant transmission license/concessions
for transmission business
Regulator approval may be required for an
investor to obtain a license from CERC/
SERC without owning the project assets
Income tax on
upfront payment
Income of NHAI exempt
(Sec.10(23C)(iv) of IT Act)
Payable at corporate rates
Toll/tariff
determination
Approves toll rates based
on formula linked to WPI
Tariff is decided based on Tariff norms;
Challenges in ARR filing due to non-
ownership of project assets by a
concessionaire may need to be addressed
at the time of obtaining regulator’s consent
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Summary
~ 2.86 lakh km of
Bharatnet Fiber
14,917 Nos. of BSNL
& MTNL towers
Bharatnet Fibre – 57%
Towers – 21%
Rs 35,100 crore 6%
Assets for
monetisation in FY
2022 to 2025
Asset monetised
as % of asset
base (FY 2022-
2025)
Indicative
monetisation
value in FY
2022-2025
Share in overall
NMP in value
terms
3.4.1 Potential asset base
The potential asset base considered are telecom tower assets under the central sector
entities, namely Bharat Sanchar Nigam Ltd (BSNL), Mahanagar Telephone Nigam Ltd
(MTNL) and Bharatnet optical fibre assets under the central sector entities, namely
Bharat Broadband Network Limited (BBNL) and Bharat Sanchar Nigam Ltd (BSNL). BSNL
currently has 68,000 towers of which ~13,567 towers have co-locations from third party
telecom operators. With more than 70% of BSNL towers fiberized, the tower infrastructure
is amenable for 4G and 5G deployments. The tower assets with co-location based revenue
stream have been considered as potential asset base for monetisation. Similar to BSNL,
MTNL also has about ~1,350 towers with co-location/ rentals which may be suitably
bundled along with BSNL tower assets for the purpose of monetisation.
About ~2,86,255 km of existing fibre assets of BBNL and BSNL, laid under the Bharatnet
project spanning over 16 states has been considered for monetisation through PPP mode.
Bharatnet is a flagship project of Government of India (GoI) funded by Universal Service
Obligation Fund (USOF), Department of Telecommunications (DoT), with an aim to
provide high speed broadband connectivity to all Gram Panchayats (GP) and extension
to their villages across India. The network infrastructure under the Bharatnet project is a
national asset and accessible on a non-discriminatory basis to all eligible service providers
to enable them to provide services in rural areas.
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Potential for deepening fibre penetration – The level of fixed broadband (FBB)
penetration in India is estimated at 6.5%, which is considerably lower than that of the
Asian peers (China 84%, Sri Lanka 26.2%, and Vietnam 49.5%). One of the primary
challenges to this scale-up is the operational constraints in the deployment of fibre in
the intra-city and last mile network segments. The Bharatnet initiative is aimed to plug
this gap in FBB. Nevertheless, the considerable untapped market and the potential
for greater penetration of fibre network is expected to generate investor interest in
these assets.
Government policy push – The government’s policy push to meet the supply-side gap
is one of the critical drivers for growth over the medium term.
aThe National Digital Communications Policy (NDCP) 2018 serves as an anchor for India’s transition to a digitally-empowered economy. Under NDCP 2018, the government provides incentives to tower companies to facilitate the establishment of mobile tower infrastructure by: (i) extending incentives and exemptions for the construction of telecommunication towers; (ii) according accelerated right of way (ROW) permission for telecommunication towers in government premises; and (iii) promoting and incentivising deployment of solar and green energy for telecommunication towers.
aThe Bharatnet project is the backbone of ‘Digital India’ and aims to reduce the digital divide between urban and rural India. The project involves laying of optical fibre cable (OFC) between block and gram panchayats. This infrastructure would be made available to service providers on a non-discriminatory basis who, in turn, would utilise it to provide affordable high-speed broadband to rural citizens and institutions. As of March 19, 2021, about 5.13 lakh km of OFC laying has been completed covering 1.57 lakh gram panchayats.
Established processes for passive infrastructure sharing (tower assets) – India has
seen active participation between telecom providers on passive infrastructure sharing. Currently, the country has seen robust frameworks for passive infrastructure sharing between telecom operators called Master Service Agreements (MSA). These agreements clearly spell out the pricing, tenure, roles and responsibilities of the parties, and other binding terms. The establishment of such formal frameworks will bring in the necessary transparency to the monetisation process and help investors identify the risks upfront.
3.4.2 Assets considered for monetisation
The following core infrastructure assets have been considered for monetisation during FY 2022 to 2025: aBharatnet Fibre assets: ~2.86 lakh route-km of Bharatnet fibre assets proposed to be bid out through PPP model by DoT through nine packages comprising 16
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and the actual outlay of capex will happen over 2 years from the date of award.
aBSNL & MTNL Tower assets: ~14,900 towers (~13,567 towers of BSNL and ~1,350 towers of MTNL ) with co-locations from third party telecom operators have been considered for monetisation during FY23. The feasibility study and transaction preparation work for the same is presently being undertaken.
Approach to monetisation
The scale of asset monetisation is guided by the urban-rural distribution of the assets. In case of tower assets, 14,900 towers have been considered.
Tower Assets: The indicative monetisation value for tower assets is arrived at based
on the EV approach factoring in available data on revenue earned from co-location
rentals, pass through charges, O&M and assumptions based on tower tenancy, ramp up
over a 30 year period. NPV of EBITDA has been taken as the indicative monetisation
value from tower asset monetisation. The same is indicative only and the actual value
realisation is a function of multiple factors intrinsic utilisation, tariff, market conditions,
MSA terms and transaction structure. Further, there are two reference transactions
in the market for monetisation of tower assets in the private sector which have seen
valuation per tower asset of about Rs ~38 lakh.
Bharatnet Fibre Assets: The indicative monetisation value for Bharatnet fibre assets is
considered based on Capex approach. The estimated capex for 9 Bharatnet packages
envisaged to be tendered out in FY 2022 has been considered at Rs 26,300 crore.
It may be noted that these packages are being structured on PPP mode with grant
/ premium as the bidding parameter. The actual private investment towards these
packages could be lower than the estimated capex and a portion of capex may be
met out of grant. The capex phasing towards the assets has been assumed as 60%
during year 1 and 40% during year 2.
3.4.3 Indicative Value of assets and phasing
The total value of assets considered for monetisation is estimated at Rs 35,100 crore for
FY 2022 to 2025, with the following asset phasing:
aBharatnet Fibre assets: Indicative monetisation value of Rs. 26,300 crores has been considered as over FY23 and FY 24. It may be noted that the actual private investment towards these packages could be lower than the estimated capex and a portion of capex may be met out of grant. The capex phasing towards the identified packages has been assumed as 60% during year 1 (assumed as FY23) and 40% during year 2 (assumed as FY 24).
aBSNL & MTNL Tower assets : Indicative valuation of Rs. 8,800 crore has been considered as monetisation value to be accrued split equally over FY22 and FY 23.
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Sl no. Asset type FY22 FY23 FY24 FY25 Total
1 Bharatnet Fibre— 15,780 10,520 — 26,300
2 BSNL & MTNL Tower assets — 4,400 4,400 — 8,800
TOTAL— 20,180 14,920 — 35,100
15,780
10,520
4,4004400
FY23FY24
Bharatnet Fibre BSNL & MTNL Tower assets
Figure 14: Pipeline phasing – Telecom assets (Rs crore)
3.4.4 Monetisation potential of telecom towers of BSNL
BSNL currently has about 68,000 towers, of which about 13,000 provide co-location
facilities to other telecom operators. BSNL is looking to increase the tenancy of these
towers to boost revenue. In the past few years, BSNL’s revenue through lease rentals has
been increasing with rise in the number of tower co-locations. More than 70% of the BSNL
sites are connected through fibre compared with the industry average of less than 25%. Of
the total 5.8 lakh towers in India, only 1.5 lakh are connected through fibre which provides
a huge competitive advantage to marketability of tower infrastructure of BSNL. With the
existence of a large number of BSNL towers at own exchange sites, there is ample space
to house the equipment. Space has been a key issue in enhancing co-location through
the number of tenants or augmenting technology. Further, BSNL’s tenancy ratio on towers
is 1.2 compared with the average of 1.9 for private players. In view of all of above, there
is significant scope for monetisation of tower rental receivables through a PPP based
concession which will also help in generating upfront equity liked funds for BSNL for
deployment towards capex.
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towers
This model entails grant of a long-term PPP concession for the utilisation of operational
pipeline capacity through a PPP concession akin to the TOT model successfully
employed by NHAI in the roads sector. The right to rent, operate and maintain the
tower rentals will be granted to a concessionaire for a pre-defined concession period
as against an upfront consideration, which could be the bidding parameter.
MSA
Upfront Consideration
& [Revenue Share]
Usageoftowers
20-25yrROT
concession&BSNL
Captive usage
agreement
Concessionaire
Authority /
BSNL
Tenants / 3
rd
party Users
Co-location
rentals /
Charges
TowerInfrastructureO&M
3.4.5 Monetisation potential of Bharatnet Fiber Network
The project is proposed to be implemented through DBFOT model under PPP mode. The implementation shall be through an SPV wherein the Concessionaire, selected through a competitive bidding process, would enter into a Concession Agreement with the Authority to Develop, Build, Finance, Operate and Maintain the Project Facilities over the pre-agreed Concession Period and Transfer the same to the Authority or its designated agency at the end of the Concession Period (DBFOT).
aCreation and Upgradation: To build and upgrade network infrastructure across GP and Block locations and extend the network to connect villages under the scope of work
aOperation and Maintenance: To operate and maintain the existing and the newly deployed network infrastructure
aUtilization: To ensure and manage utilization of existing and deployed capacity across the network infrastructure in a non-discriminatory manner.
Table 8:
Project packages envisaged under Bharatnet
PackagesLicensed Service Area (LSA)
Package 1 Kerala, Karnataka
Package 2 Uttar Pradesh (East)
Package 3 Uttar Pradesh (West)
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Package 5 Punjab, Haryana, Himachal Pradesh
Package 6 West Bengal
Package 7 Arunachal Pradesh, Mizoram, Tripura, Manipur, Nagaland, Meghalaya
Package 8 Madhya Pradesh
Package 9 Assam
The Concession Period of 25 years (including construction period) from the appointed
date (fulfilment of conditions precedent) is envisaged. Upon the expiry of the Concession
Period, project facilities would be handed over to the Authority at no cost. Bid parameter
shall be Grant or Premium.
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Summary
6.0 GW (~3.5 GW
Hydro, ~2.5 GW RE)
6%Rs 39,832 crore
7%
Assets for
monetisation over
FY22-25 (GW)
Assets planned for
monetisation as %
of asset base over
FY22-25
Indicative
monetisation value
over FY22-25
Share in overall
NMP in value terms
3.5.1 Potential asset base
The power sector accounts for the largest share of investments in infrastructure. The
energy use is projected to grow rapidly to fuel economic development, urbanisation
and improved electricity access. India’s growing per capita consumption of energy, calls
for huge investments in the sector for installation of new capacities and upgradation of
existing ones. Electricity Act, 2003 has been a game changing comprehensive legislation
in the sector pushing the sector onto a trajectory of commercial growth.
The potential asset base considered is the existing power generation capacity of central
sector entities under the Ministry of Power. The total installed capacity of power generation
sector in India was 382 GW as on April 30, 2021
21
. The private sector share in installed
generation capacity is ~47%. Out of the total installed capacity of 382 GW, about 97.5 GW
is in the Central sector and under central PSUs as on April 30,2021. Bulk of this capacity
is coal and gas based. Based on estimates, the share of central sector agencies according
to the nature of fuel is as follows: coal – 74%; gas – 9%; hydro – 15%; and renewables –
3%. Various central sector entities such as National Hydroelectric Power Corporation Ltd.
(NHPC), National Thermal Power Corporation Ltd (NTPC), Satluj Jal Vidyut Nigam Ltd
(SJVNL) and NLC India Ltd (Neyveli Lignite Corporation Ltd) under Ministry of Coal hold
this asset base.
Renewable Energy (RE) segment has made significant strides in recent years reporting
substantial increase in capacity on the back of strong government support, private
sector investment, favourable policies and incentives, as well as falling cost of generation,
particularly for the wind and solar power. There is also strong investor appetite for stable
RE assets as evidenced by recent transactions.
21 https://powermin.gov.in/en/content/power-sector-glance-all-india
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Focused government initiatives – The government’s recent initiatives to address the
weakest link in the power sector, viz. distribution, is expected to boost investor interest
in power generation projects. Key steps include the following:
!Mitigation of counterparty risks associated with discoms – Introduction of Solar
Energy Corporation of India (SECI) as a nodal agency and as an intermediary between the private sector (power gencos) and discoms for RE projects presents a credible counterparty to the private sector vis-à-vis discoms
!Liquidity support packages – The government had approved liquidity support
packages involving one-time loans of about Rs 1,30,000 crore from Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to discoms, to clear their overdue payments to power generating companies. To date, total disbursements under this scheme have aggregated to about Rs 75,000 crore. Timely implementation of this liquidity support scheme is crucial in the near term amid the adverse impact of the Covid-19 event and related lockdown
!Other long-term measures are being introduced for sustained improvement in discoms’ finances – (i) Recent directive from the power ministry to all regulatory bodies to issue tariff orders of all distribution licensees with an objective to ensure timely revision of cost-reflective tariffs
22
; (ii) installation of smart meters and moving
the consumers to prepaid basis to reduce AT&C losses; (iii) introduction of a Rs 3 lakh crore reforms-linked distribution reforms scheme involving disbursement of funds to discoms linked to them achieving set milestones
!The government has announced key measures to address investor concerns related to sanctity of contracts not being honoured – the Electricity Contract Enforcement Authority would adjudicate on performance of contracts
ESG-compliant clean energy projects – Investments in clean energy projects help
institutional investors comply with their goals related to environmental, social, and governance (ESG) investments. Hence, renewable energy projects are expected to garner significant investor interest over the medium term.
Strong economic case for investing in renewable energy – Increasing investor interest in
the renewable generation sector can be attributed to the government placing greater
emphasis on promoting renewable energy investments, through measures such as
providing fiscal incentives, and enabling more favourable policies and regulatory
frameworks. Further, investors are looking at renewable energy as part of their ESG
considerations.
3.5.2 Assets considered for monetisation
The assets considered for monetisation over FY 2022-25 aggregate to 6.0 GW. Out of
this, about ~3.5 GW is from hydel assets and about ~2.5 GW is RE assets (solar and wind).
22 In compliance with the provisions of Electricity Act 2003 and Tariff Policy 2016
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generation capacity under central PSUs. Key entities whose assets have been considered
are NHPC, NTPC & SJVNL who own bulk of the hydel assets and NTPC (under Ministry
of Power) and NLC (under Ministry of Coal) that own renewable assets.
Table 9 :
Phasing of pipeline of power generation Assets (figures in MW)
CategoryFY 22 FY 23 FY24 FY 25 Total
Hydro assets–existing373 870 870 1,243 3,355
RE assets – existing— 245 612 1,106 1,962
Hydro assets – to be operational— — 59 59 117
RE assets – to be operational— — 235 300 532
Total 373 1,115 1,775 2,707 5,970
Approach to monetisation
In the case of power generation assets, the assets considered for monetisation (GW)
and the indicative monetisation value (Rs crore) over FY 2022-25 are arrived at based
on the following steps:
Step 1 – Asset considered for monetisation
!Monetisation of coal and gas assets has not been considered during the NMP
period. The interest of global investors in these assets is limited by the strict ESG
guidelines under which they operate and the uncertain long-term potential of the
assets. Further, asset-level risks such as the dependence on high-cost LNG imports
also limit private-sector participation in gas-based power plants, unless backed by
(i) assured supply of cheaper gas, or (ii) policy-level push to incentivise discoms
to buy gas-based power, or (iii) bundling with Renewable Energy (RE) power to
firm up supply from RE sources
!Operational hydel generation assets are more amenable to monetisation given the offered flexibility in operations and renewable nature rendering them eligible for meeting Renewable Purchase Obligation (RPO) for states. Further, the hydro assets operating under a regulated tariff regime provide a degree of predictability to investors on the return on their invested capital. Around 3.5 GW of hydro assets (which is 27% of the existing hydro generation asset capacity of central PSUs of about 12,864 MW) have been considered for monetisation over FY 2022-25 as these could be seasoned assets and have a proven track record of operations and stabilisation in receivables (days) due from off-takers.
!The existing solar capacity of central sector agencies is estimated at ~2.5 GW, with an additional 1 GW capacity to be added over the next two years. Around 2.5 GW of solar capacity (i.e. ~100% of the existing solar capacity by central PSUs namely, NTPC and NLC, of about 2,447 MW) has been considered for monetisation over
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!FY 2022-25 assuming seasoning for such assets. Given that solar generation is
largely private-sector driven and given that government should rather take the
‘stewardship’ role of nurturing the sector and giving policy direction rather than
operating these assets, a larger chunk of RE assets have been considered for
monetisation.
Step 2 – Arriving at the indicative monetisation value
!The book value approach has been adopted to determine an indicative value of the above-mentioned assets varying based on the vintage value of the asset. (i) the average realisation value for hydel assets has been tentatively considered as Rs 7.5 crore per MW; (ii) the average realisation value for solar assets has been tentatively considered as Rs 5.5 crore per MW
!The product of asset considered for monetisation (in MW) and above-mentioned book value of assets (Rs crore per MW) are used to compute the annual indicative monetisation value (Rs crore) for assets in each sub-sector, such as solar, hydel, and wind power plants
3.5.3 Indicative value of assets and phasing
The indicative value of assets considered for monetisation is considered at Rs 39,832 crore over FY 2022-25. The summary of annual phasing is as follows:
Asset typeFY 22 FY 23 FY 24 FY 25 Total
Monetisation Value (Rs crore) 2770 7808 11704 17550 39,832
Assets considered (MW) 373 1,115 1,775 2,707 5,970
2770
7808
11704
17550
2707
1775
1115
373
FY 22FY 23FY 24FY 25
Figure 15: Monetisation pipeline phasing – power generation (Rs crore)
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Summary
8,154 km25% Rs 24,462 crore 4%
Assets for
monetisation in
FY22-25 (km)
Asset planned for
monetisation as
a % of asset base
(FY22-25)
Indicative
monetisation
value in FY22-25
(Rs crore)
Share in overall
NMP in value
terms (%)
3.6.1 Potential asset base
The total potential asset base considered are the natural gas pipeline assets managed
by the central sector entities. Natural Gas Pipeline Infrastructure connects various gas
sources to different gas markets to meet the existing/ future natural gas demand of various
Power, Fertilizer, CGD and other industries in the Country. The gas pipeline infrastructure
has facilitated widespread industrialization and has brought significant socio-economic
changes to different parts of the country.
India is the third-largest global energy consumer, after China and the US. India’s primary
energy requirement is met through a mix of oil and coal, with natural gas forming a 6% share
of the energy mix. As part of its environmental agenda, the government aims to increase
the share of gas to 15% by 2030. Towards this, expansion of the existing transmission
pipeline network and improvement in capacity utilisation of available pipelines become
essential. The operational network of natural gas pipelines in India spans about ~16,900
km with a design capacity of ~400 mmscmd.
1
An additional 18,363 km of natural gas
pipeline network is approved/under construction stage. Hence, the natural gas grid of
India is estimated to expand to ~35,263 km in the next three to five years.
The public sector utilities dominate the pipeline development and operation space. The
Government recognizes the need to augment the natural gas transmission infrastructure
in the country and has been driving the development of natural gas pipeline connecting
all regions of the country which is shaping-up into Natural Gas Grid (NGG).
Over the years, GAIL as a major gas pipeline operator has contributed to the growth
and development of natural gas pipeline infrastructure and natural gas market. It has an
existing gas pipeline network of 13,389 km with a capacity of 204 MMSCMD.
The table below summarises the total asset base of operational Natural Gas Pipelines of
GAIL.
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S. No.Network/ Region#Length (KM)*
1
Hazira-Vijaipur-Jagdishpur & Gas Rehabilitation and Expansion
Project & Dahej-Vijaipur Pipeline Network (HVJ-GREP-DVPL-I)
5,030
2 Dahej-Vijaipur Pipeline (II) & Vijaipur-Dadri Pipeline Network. 1,290
3 Tripura Network60
4 Cauvery Basin242
5 Chhainsa-Jhajjar-Hissar Pipeline Network (CJPL)304
6 Dahej-Uran-Panvel-Dabhol Pipeline Network935
7 Dadri-Bawana-Nangal Pipeline Network868
8 Dabhol-Bengaluru Pipeline Network (DBPL)1,148
9 Gujarat Regional Pipeline Network663
10
Jagdishpur Haldia & Barauni Guwahati Pipeline Network
(JHBDPL)
1,098
11 KG Basin Pipeline Network889
12
Kochi-Koottanad-Bengaluru-Mangaluru Pipeline Network
(KKBMPL)
504
13 Mumbai Regional Pipeline Network125
14 Dedicated Networks233
Total Length13,389
GAIL has been operating at about ~49-52% capacity utilisation levels in recent years. GAIL
markets about 25% of its pipeline capacity as common carrier capacity. It has a 100+
customer base of shippers that use its pipeline network on an open-access basis. While
the trunk/cross-country pipelines of GAIL do report higher capacity utilisation levels, the
overall utilisation is still sub-optimal.
Factors influencing monetisation of the asset class
Established customer relationships: The natural gas pipeline assets are usually backed by long-term customer relationships, ensuring cash flow stability. The market leader GAIL has well established and long-standing relationships with customers across industry segments, including power, fertiliser, city gas distribution companies, etc.
Regulated pricing regime: The natural gas pipelines operate under a regulated pricing
regime. The oil regulator Petroleum and Natural Gas Regulatory Board (PNGRB), by
tariff regulations, determines the per unit tariff for natural gas pipelines, allowing
operators a reasonable post-tax return on capital employed, and remains fixed for its
entire economic life. The ‘per unit tariff’ is determined for the natural gas pipeline over
its economic life and is levelised across certain periods.
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growing natural gas markets globally, led by supportive government policies–aggressive
investment plans towards production, import and distribution infrastructure, and
measures such as new licences for city gas distribution, raising pipeline tariffs for long-
haul pipes, and banning more polluting fuels like fuel oil and pet coke. In November
2020, PNGRB simplified the country’s gas pipeline tariff structure to make fuel more
affordable for distant users and attract investment for building gas infrastructure.
Further, to usher gas-based economy, a national gas exchange plan is under discussion
to bring market-driven pricing in the Indian energy market.
Structures to enable consistent and stable cash flows: The pipeline business’s
performance depends on the volume of gas transported. The gas transmission revenues
are substantially derived from gas transportation agreements with customers having
high dependence on select large customers. Structures, where the central sector
agencies provide some backstop arrangements to reduce the counterparty risks, may
provide some comfort to investors. This will enable near-term revenue visibility with a
minimum guaranteed offtake. Possible arrangements include:
SPV may enter into a pipeline usage agreement (PUA) with the sponsor, whereby the
latter could contract a certain capacity of the pipeline for a long term, thus providing
assured offtake for a threshold level of throughput
The arrangement could ensure steady cash flows to the SPV in case the actual revenue
is lower, either on account of lower gas volume or tariff considerations
3.6.2 Assets considered for monetisation
The assets considered for monetisation during FY 2022-2025 are select gas pipelines with
an aggregate length of ~8,154 km, of which 7,928 km are from the existing operational
pipeline assets and the rest from pipelines that are expected to become operational during
the NMP period.
During FY22, two pipelines with a total length of 2,229 km namely, Dabhol-Bengaluru
pipeline (length of 1,414 km & capacity of 16 mmscmd) and Dahej-Uran-Panvel-Dabhol
pipeline (length of 815 km & capacity of 20 mmscmd) have been identified for monetisation.
Over the balance NMP period (FY23-25), a total of 5,925 km of pipeline assets have been
considered for monetisation (~1554 km in FY 23, ~2073 km in FY 24 and ~2298 km in FY
25). The specific pipelines / bundles would need to be identified corresponding to the
years pipeline.
The total assets considered for monetisation (~8154 km) over FY23-25 form around 23%
of the aggregate pipeline asset base (total gas pipeline network of ~35,263 km envisaged
as part of the Gas Grid).
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In case of natural gas pipeline assets, the assets considered for monetisation (in
kilometres of pipeline) and the indicative monetisation value (Rs crore) over FY 2022-
2025 are based on the following:
Step 1 – Asset considered for monetisation.
!Existing assets are shortlisted based on (i) the existing capacity utilisation of the
piped network, and (ii) potential demand, especially based on connected regions.
Through this methodology, pipeline assets of 7,928 km for monetisation have been
identified during FY 2022-2025
!Of the new natural pipelines to be constructed, about 200 km of pipeline assets
23
have been estimated to be monetised over the NMP period. For any new project, at least two years of operational track record has been assumed (to ensure the minimum level of capacity utilisation)
Step 2 – Arriving at the indicative monetisation value
The Enterprise Value (EV) approach (in Rs crore per km) has been considered for
estimating indicative value based on available data on pipeline tariff order and
assumptions w.r.t. utilisation, peak utilisation, ramp up, tariff and throughput. However,
the valuation differs from one pipeline to another. The average value for the purpose
of ascertaining monetisation value has been accordingly considered at Rs 3.0 crore per
km. The same is indicative only and the actual value realisation is a function of multiple
factors intrinsic pipeline utilisation, tariff, assured capacity offtake and transaction
structure terms.
A reference transaction available for pipeline valuation is the East West pipeline
monetisation (Kakinada to Bharuch) undertaken in the private sector in 2019. The
reference valuation of this asset was about Rs. 10 cr / km. The said transaction however
had components of captive utilization and assured offtake / revenue arrangements.
3.6.3 Indicative value of assets and phasing
The total value of assets considered for monetisation is estimated at Rs 24,462 crore
during
FY 2022-2025
23 This is because the existing assets already include a bulk of the ongoing and under construction projects,
which will be operational by FY 2022 or FY 2023
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3.6.4 Indicative structures for monetisation
Carry-operate-transfer (COT) concession
This model entails grant for a long-term PPP concession to utilise operational pipeline
capacity through a PPP concession akin to the TOT model, successfully employed by
NHAI in the roads sector. Entities can explore this model without creating the pipeline
subsidiary or actual transfer of pipeline assets from the balance sheet into a separate SPV.
The rights to utilise and market the capacity of the pipeline on a common carrier principle
will need to be valued to determine the initial estimated concession value in this option.
This structure will require regulatory consultation and approval from the regulator PNGRB
to determine regulatory feasibility of grant of concession by GAIL.
Creation of a Pipeline InvIT
In the recent past, InvITs have emerged as a preferred infrastructure financing vehicle
to attract investments, especially by foreign institutional investors. In the natural gas
transmission sector, there is a precedence of InvIT-based structure, when India Infrastructure
Trust, an infrastructure investment trust sponsored by Brookfield Asset Management
(BAM), took over 100% ownership of 1,375 km long Kakinada to Bharuch natural gas
pipeline from a private sponsor for a period of 20 years against an upfront consideration.
Under an InvIT structure, operational pipeline assets or revenue rights on the assets can be
parked directly or through an SPV under an InvIT. InvIT (the trust) can be owned by the
asset owner CPSE as the ‘Sponsor’ with investors holding a partial stake. An InvIT structure
involves high standards of strong corporate governance through the appointment of an
investment manager, project manager and trustee.
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ASSETS
Summary
3,930 km23% ~Rs 22,503 crore 4%
Assets for
monetisation over
FY22 to FY25
(km) (Product +
LPG pipeline)
Asset monetised
as % of asset
base (FY22-25)
(Product + LPG
pipeline)
Value in FY22-25
(Rs crore)
Share in overall
NMP in value
terms (%)
Asset Classes:
!LPG Pipelines
!Petroleum product pipelines
!Hydrogen generation plants
!ESG assets (Effluent treatment plants, Sulphur recovery
units, Flare gas recovery systems)
3.7.1 Potential asset base
The total potential asset base considered are the operational product and LPG pipelines
operated by the central sector entities, namely Indian Oil Corporation Ltd (IOCL), Hindustan
Petroleum Corporation Ltd (HPCL) and Gas Authority of India Ltd (GAIL). The operational
product and LPG pipelines in India are ~17,432 km, including (i) 43 product pipelines
extending to 14,063 km, and (ii) 6 LPG pipelines extending to 3,369 km.
In this segment, IOCL is the key central sector entity, as it has about 52% share in product
pipelines (by length) and operates a network of more than 14,600 km long crude oil,
petroleum product and gas pipelines with a throughput capacity of 94.42 mmtpa of oil
and 21.69 mmscmd of gas. Other entities that also operate product pipelines are BPCL,
HPCL and GAIL. The bulk of the pipelines have utilisation levels exceeding 100%, ensuring
a strong revenue visibility. Around 45% of the total product pipeline length (~6,292 km)
reported utilisation levels above 100%; another 21% of the pipeline network with utilisation
levels of between 80-100%.
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High utilisation levels and counterparty risk profile ensure stable cash flows: The bulk
of the crude pipelines network has a capacity utilisation exceeding 100%. Almost 45%
of the total pipeline network reports capacity utilisation of more than 100%. Another
21% of the total network reported a capacity utilisation between 80% and 100%. The
utilisation levels are similar in case of LPG pipelines with 42% of the network (in km)
reporting a capacity of 100% and above.
Regulated pricing regime: Similar to the natural gas pipelines, PNGRB grants the
authorisation for the development of petroleum and petroleum product pipelines. The
product pipelines operate under a regulated pricing regime. The tariff of Petroleum
and Petroleum Product Pipelines (other than those awarded through bidding process)
is determined under PNGRB (determination of Petroleum and Petroleum Products
Pipeline Transportation Tariff) Regulations, 2010. According to these regulations, the
transportation tariff for such pipelines is determined by benchmarking the same against
an alternate transportation mode (i.e. rail) at the level of 75% on a full train load basis
for equivalent rail distance, except for LPG where 100% parity with rail tariff is allowed.
3.7.2 Assets considered for monetisation
The assets considered for monetisation during FY 2022-2025 are petroleum product /
LPG pipelines of ~3,930 km. Out of this, ~3,196 km are product pipeline assets and ~733
km are LPG pipeline assets.
HPCL’s, Mangalore – Hassan pipeline (LPG pipeline) has been identified for monetisation
during FY 23. Other assets for monetisation from HPCL for subsequent years in NMP will
be identified.
The total pipeline assets identified for monetisation under the product pipeline (3,196
km) and LPG pipeline (734 km) assets category as a percentage of total respective asset
base (product pipelines of 14,063 km and LPG pipelines of 3,369 km) are 23% and 22%,
respectively.
Besides the pipeline assets above, other asset classes including 2 Hydrogen Generation
plants at the Gujarat Refinery of IOCL have been identified for monetisation over FY22
and FY23 with an estimated indicative monetisation value of Rs. 1,200 crore. Other asset
classes from IOCL include ESG assets (effluent treatment plants, Sulphur recovery units,
Flare gas recovery systems) in a phased manner over the NMP period with an estimated
indicative monetisation value of Rs. 8,000 – 10,000 crores.
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S.No. Asset type FY22 FY23 FY24 FY25 Total
1
Petroleum product
pipelines (km)
755 629 906 906 3,196
2 LPG pipelines (km) - 141 296 296 733
3
Hydrogen generation
plants (nos.)
1 1 - - 2
4 ESG assets*
Not
available
Not
available
Not
available
Not
available
Not
available
*Details of ESG assets to be monetised are available with the respective line ministries
Approach to monetisation
In case of product and LPG pipeline assets, the assets considered for monetisation (in
kilometres of pipeline) and the indicative monetisation value (Rs crore) over FY 2022-
2025 are arrived through following steps:
Step 1 – Asset considered for monetisation
!The assets for monetisation have been shortlisted based on the existing capacity
utilisation of the piped network. The pipelines with the capacity utilisation of 100%
and above have been considered. However, the public sector agency may bundle
some of the high utilisation assets with moderate and low utilisation assets to
ensure better risk transfer
!Out of the overall asset base of product pipeline assets of 14,063 km, ~2,643 km of pipeline assets have been considered for monetisation over FY 2022-2025. New product pipeline assets (including under construction pipelines and projects currently under preparation stage) totalling ~554 km is envisaged to be monetised over the same period
!Similarly, out of the overall asset base of LPG pipeline assets of 3,369 km, ~734 km of assets have been considered for monetisation over FY 2022-2025
!Based on this process, a total of 3,930 km of petroleum product and LPG pipeline assets have been identified for monetisation during FY 2022-2025
Step 2 – Arriving at the indicative monetisation value
!Hydrogen Units & ESG assets: Indicative monetisation value for these assets has
been taken based on information on monetisation value received from the ministry. Based on the range provided by the ministry of Rs. 8,000 – 10,000 crores, Rs. 8,000 crore has been considered divided equally over the NMP period for ESG assets which will be monetised as core assets. For Hydrogen generation Plants, Rs. 1,200 crores divided equally over FY22 & 23, has been taken as the indicative monetisation value based on information provided by the ministry.
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!Product pipeline assets: EV approach has been adopted to determine the indicative
monetisation value for pipeline assets. The NPV of the operating profit across
pipeline assets has been taken as the basis for arriving at indicative monetisation
value. The operating profit has been estimated across two steps: (i) Estimation of
tariff based on PNGRB approved rates in NPV terms across fixed (Rs 0.1 per MT)
+ variable component (Rs 10 per MT per km) for recent pipeline transactions (ii)
Operating margin factor of 65% assumed on the above tariff to estimate the NPV
of operating profit. The above figures are indicative in nature and the actual value
realisation is a function of multiple factors including intrinsic pipeline utilisation,
tariff, assured offtake and transaction structure.
!LPG pipeline assets: EV approach has been adopted to determine the indicative monetisation value for LPG pipeline assets. As in the case of product pipeline assets, the NPV of the operating profit across LPG pipeline assets has been taken as the basis for arriving at indicative monetisation value. The NPV of tariff of Rs 12 per MT per km (in line with tariffs for select pipeline transactions) and an operating margin of 65% has been assumed for estimating the indicative value. The same is indicative only and the actual value realisation is a function of multiple factors including intrinsic pipeline utilisation, tariff, assured offtake and transaction structure.
3.7.3 Value of assets and phasing
The total value of assets considered for monetisation is estimated at Rs 22,503 crore for
FY 2022-2025.
Table 12: Phasing of monetisation value – Petroleum product / LPG pipeline & other
assets (Rs cr)
Sl no. Asset type FY22 FY23 FY24 FY25 Total
1 Petroleum product pipelines 2,697 1,873 4,164 4,164 12,898
2 LPG pipelines 0 40 183 183 405
3 Hydrogen generation plants 600 600 - - 1,200
4 ESG assets2,000 2,000 2,000 2,000 8,000
TOTAL5,297 4,513 6,347 6,347 22,503
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Summary
~210 lakh metric
tonne (LMT)
— 175 LMT – FCI
— 35 LMT–CWC
39% Rs 28,900 crore 5%
Assets planned
for monetisation
in FY 2022 to
2025
Asset monetised
as % of asset
base (FY 2022 to
2025)
Indicative
Monetisation
value in FY 2022-
2025
Share in overall
NMP in value
terms
3.8.1 Potential asset base
The potential asset base considered for monetisation under warehousing assets consists of
storage depots, warehouses under the central sector agencies, Food Corporation of India
(FCI) and Central Warehousing Corporation (CWC), with both entities operating under
the aegis of Department of Food & Public Distribution. Existing storage capacity with FCI
and other agencies for central pool stocks as on April 1, 2020 is 755 Lakh Metric Tonne
(LMT). Out of this, 412 LMT is available with FCI and 343 LMT with the state agencies.
FCI’s storage capacity of 412 LMT is in turn 30% owned and 70% hired (through CWC,
SWCs, and the private sector). CWC operates 422 warehouses with a total operational
storage capacity of 109.72 LMT
24
. This includes custom bonded warehouses, container
freight stations, inland clearance depots, air cargo complexes, etc. The potential assets
for monetisation are owned warehouses of FCI and CWC.
The aggregate storage capacity with the key central sector agencies – FCI and CWC –
is estimated to be ~521 LMT (~412 LMT with FCI & 109 LMT with CWC). Out of the FCI
available asset base, FCI owned storage infrastructure i.e. about 123 LMT is amenable
for monetisation as the facilities have a strong potential for augmentation and capacity
expansion. CWC’s entire capacity of ~110 LMT is amenable for monetisation as it has a
revenue stream (in form of storage charges from FCI & other users) and also a strong
commercial potential for augmentation, capacity expansion and O&M.
The public distribution system (PDS) is an integral part of India’s food security system,
operated by the nodal Ministry of Consumer Affairs, Food, and Public Distribution. The
central government, through FCI, has assumed the responsibility for procurement, storage,
transportation and bulk allocation of food grains to the state governments, for eventual
distribution to beneficiaries through the PDS. FCI manages the functions of procurement
24 https://dfpd.gov.in/cwc.htm
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transportation of food grains and other notified commodities. These stocks eventually
are distributed to the beneficiary consumers at the PDS shops through various welfare
schemes of the government.
Hence, owing to the policy mandate of MSP operations, there is a continual need to
augment the storage capacity. In this context, adequate storage infrastructure is of
paramount importance owing to the requirement to hold huge inventories of food grains
over a significant period of time. Adequate scientific storage is, hence, a pre-requisite to
fulfil the policy objectives assigned to FCI, for which it has a country-wide network of
strategically located warehouses and storage depots.
India needs more bulk handling facilities than it currently has. Many of FCI’s old conventional
storage warehouses and depots (covered-and-plinth [CAP] type storage) have existed
for several years and are located in proximity to production hubs. There is significant
potential in improving the infrastructure and reducing the cost of storage and handling
losses by tapping private sector efficiencies in operations and management. The continual
need to augment the storage infrastructure necessitates leveraging the existing storage
warehouses and depots to tap private long-term institutional capital by employing
structured investment vehicles and brownfield PPP models so as to ease the burden on
budgetary support requirement.
Factors influencing monetisation of the asset class
Growth in e-commerce space: The expanding e-commerce space offers a new set of
opportunities for the warehousing and logistics players. FCI and CWC have a sizeable number of underutilised warehouses near urban centres. Considering the potential growth in demand for warehouses due to e-commerce growth, monetisation of such assets is expected to bring in significant value from the private sector.
Established track record of agencies in private sector engagement: FCI and CWC have
an established track record in dealing with private sector players over the years. Hence,
the institutional understanding as well as the regulatory framework for engagement is
successfully in place in these firms. One of the landmark private sector engagement
initiatives is the Private Entrepreneurs Guarantee (PEG) Scheme for augmenting the
storage capacity of FCI in PPP mode. Under this scheme, storage capacity is created
by private parties under an assured capacity offtake arrangement by FCI. A total of
153 LMT of storage capacity has been initiated under the scheme as of February 2021.
Value maximisation: Most of the warehouses that were planned and constructed
between 1980 and 1990 are located in prime locations and in proximity to city centres
that have now become part of the urban landscape. Thus, these land parcels can be
leveraged for augmenting the quality as well as capacity of storage infrastructure. The
private sector can be mandated to undertake the task of redevelopment/ refurbishment
of assets while ensuring minimal operational disruption and incremental cost for the
authority.
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the normal procurement season for central pool food grains in the country is ~650
lakh MT. Against this, the total storage capacity available with FCI, CWC, and the state
agencies (both owned and hired capacity, including CAP) is 875.09 lakh MT at a pan-
India level. Thus, it is imperative to optimally rationalise the existing capacity, while
ensuring high operational efficiency by leveraging the strength of specialised firms.
Approach to monetisation
In case of warehouses, the assets considered for monetisation have been taken based on preliminary pipeline information provided by the Department of Food & Public distribution (DoFPD). The pipeline presently consists of storage infrastructure assets with need of significant augmentation in infrastructure and rehabilitation. Accordingly, the key project interventions have been identified by the line ministry. Hence the monetisation value has been considered in form of private sector investment towards augmentation of these assets.
The indicative monetisation value has been arrived at based on the ‘Capex approach’.
The capex for all the projects has been based on high level estimates provided by the
DoFPD as part of the pipeline. The cost assumptions are as follows: (i) capex per LMT
for silos has been estimated at Rs 100 crore per LMT, (ii) cost per cold storage facility
has been considered at Rs 40 crore per location.
Indicative Monetisation Value considered at this stage is only a preliminary estimate
based on high level asset information and thumb rule estimates.
Besides, storage infrastructure, DoFPD has also identified land parcels and vacant land
for monetisation however the same has not been considered under NMP as they will
be monetised as non-core assets.
3.8.2 Assets considered for monetisation
The assets considered for monetisation during FY 2022 to 2025 have an aggregate
capacity of ~210 LMT.
The key asset classes under asset monetisation include (i) development of 175 LMT of wheat
silos by FCI, (ii) development of 35 LMT silos at 45 locations by CWC, (iii) development of
cold storage facilities in 190 locations by CWC and (iv) development of 1.16 LMT storage
capacity by Central Railside Warehouse Company Ltd (CRWCL).
The DoFPD is also in process of developing pipeline of other brownfield assets and
finalisation of monetisation mechanisms other than development of Silos and cold storages.
The assets of FCI & CWC considered for monetisation aggregating to ~210 LMT are about
39% of the existing storage capacity available with FCi & CWC i.e. 512 LMT (~412 LMT with
FCI & 109 LMT with CWC).
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The total value of assets considered for monetisation is estimated at Rs 28,900 crore for
FY 2022 to 2025, and phased as follows:
Table 13: Phasing of monetisation value – Warehousing assets (Rs cr)
S.No. Asset type FY22 FY23 FY24 FY25 Total
1 Storage Infrastructure–FCI 3,500 5,250 5,250 3,500 17,500
2 Storage Infrastructure–CWC 2,280 3,420 3,420 2,280 11,400
TOTAL5,780 8,670 8,670 5,780 28,900
2,280
3,4203,420
5,2505,250
3,500
2,280
3,500
Figure 18: Monetisation value – Warehousing (Rs crore)
3.8.4 Indicative structures
In recent years, alternative means of monetising operating projects have evolved in India,
wherein significant interest has been showcased by potential private investors. Several
options have been successfully implemented depending on the specific requirement of
shareholders. However, the success of such monetisation would depend on the location
selected, keeping in mind the interest/ appetite of investors, regulatory requirements,
shareholder requirements, type of contracts and governance/ control sought by investors
in operating projects, etc. In view of these factors, the following options can be considered:
1. Monetisation via the infrastructure investment trust (InvIT) route
2. Suitable PPP models akin to TOT (toll-operate-transfer) model adopted by NHAI for highways suitably customised for brownfield warehousing assets and OMD based model for assets where augmentation and capacity expansion is envisaged.
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Multiple structures to monetisation have been evaluated, including InvIT, OMD model.
A typical structure of transaction is as follows:
InvIT-based monetisation
InvIT-based monetisation of SPV (north/ west/ east zone-wise warehousing asset
clusters may be formed) with long-term contracted rights to earn storage charges
from FCI and other third party users. This structure may entail creating an SPV with
requisite revenue rights. Independent investment manager and specialist professional
project managers are key to this InvIT based monetisation.
Tenure: 25-30 years with transfer back to the Authority / Sponsor at the end
Other features:
!Assured storage capacity for FCI’s captive use and storage needs
!Professional management and key performance indicators (KPIs; handling losses,
etc)
!FCI and / or CWC could be co-sponsors of the InvIT
!Since investors look at scale, region-wise clusters may be formed. InvIT-based monetisation of SPV (north/ west/ east zone-wise) with long-term contracted rights to earn storage charges from FCI
Indicative transaction structure
Operate, Manage and Develop (OMD) based PPP model
!OMD for brownfield warehousing assets with rights to add additional capacity/ augment existing infrastructure and at vacant land
!Tenure: 25-30 years with transfer at the end of the concession
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!Revenue model: Storage and handling charges paid by FCI (assured capacity)
and third parties (surplus capacity)
!Other features: Strict KPIs (handling losses, etc) and mandatory investments may
be specified
!Benefits to Investors:
!Strategic locations: surplus production areas or in the consumption areas
!Presence of trunk infrastructure
!Reduced gestational time
!Professional management and investment in mechanisation
Indicative transaction structure for an OMDA-based model for warehouse
monetisation
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Coal Mining Assets–Summary
160 projectsRs 28,747 crore5%
Number of identified
projects for monetisation
over FY22-25
Indicative monetisation
value over FY22-25
period
Share in overall NMP in
value terms
Mineral Mining Assets–Summary
761 blocks over FY22-25
Fresh mineral blocks
G4 level Composite
License, G2 / G3 level
Mining Lease
Non-working mines
ML applications under
Section I0A(2B)
Auctioned by :
Respective State
Governments
Value : Not assessed
3.9.1 Potential asset base
Coal Mining Assets
The total inventory of coal resources in India (up to a depth of 1,200 metre) was estimated
25
at about 344 billion tonne as per GSI as on April 1, 2020. As per CIL (Coal India Limited)
demand for coal was estimated at 1,000 MT for FY 2020, whereas the indigenous availability
was estimated at 811 MT. The gap of 189 MT was projected to be met through imports.
Factors influencing monetisation of the asset class
Strong policy push by the government to open up the sector – The push towards
reducing dependence on coal imports was one of the major policy initiatives under the pioneer ‘Atmanirbhar Bharat’ initiative by the government. The government’s recent initiatives towards opening up commercial mining to the private sector in India remains a landmark reform for asset monetisation. The Mineral Laws (Amendment)
25 Prepared by the Geological Survey of India on the basis of resources estimated by CMPDI, MECL, GSI,
and SCCL
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26
, is expected to bring in higher inventory of assets towards auction, and
increase participation of the private sector by removal of end-user restriction on coal
assets for the private sector. It also amends the methodology for auction of coal and
lignite mines/blocks for sale of coal/lignite on a revenue-sharing basis. The sector is
also open to global investors as 100% FDI (Foreign Direct Investment) is allowed for
the coal and mining sector.
Streamlining the approval process – The government’s recent launch of the Single
Window Clearance portal for coal mining is expected to streamline the approval
process and reduce the lead time to starting commercial exploration of coal assets.
It is a unified platform that facilitates grant of clearances and approvals required for
starting a coal mine in India.
Success of the first auction – Pursuant to the opening of the commercial coal mining
sector, the first auction was held in June 2020. Out of the 38 mines put on auction,
financial bids were received for 19 mines
27
. These assets saw a fair bit of competition and
high premium (despite uncertainties due to the Covid-19 event and related lockdown).
The highest premium was 66.75%, whereas the average premium was 29%. States are
also expected to raise revenue of Rs 6,656 crore annually through the auction.
Mineral Mining Assets
Auction of mineral blocks is undertaken by the respective State Governments. Once a
mineral block is auctioned, various clearances such as forest clearance, environmental
clearance and other statutory clearances are obtained prior to commencement of
production. Upon commencement of production, the royalty and auction premium on the
mineral produced and dispatched typically constitutes the income from the mine. However,
royalty and auction premium are paid to the Government as and when the mineral is
removed from the leased area. Hence, the auction of mineral blocks may not yield upfront
lump sum proceeds. The proceeds / revenues accrue to the State governments and is
spread throughout the mining lease period.
Ministry of Mines in 2015 amended the MMDR Act, 1957 which introduced auction regime
to bring transparency in allocation of mineral blocks. Besides, the Ministry has initiated
a number of reforms pertaining to auction of mining blocks as a result of which a large
number of mineral blocks will be available for auction during the coming years.
26 Reforms to the Coal Mines (Special Provisions) Act, 2015, and the Mines and Minerals (Development and
Regulation) Act,1957
27 Out of these successfully auctioned 19 mines, 11 are opencast, five are underground mines, and the
remaining three are a mix of underground and opencast mines. These mines are spread over five states –
Madhya Pradesh, Chhattisgarh, Odisha, Jharkhand, and Maharashtra – and have consolidated peak rated
capacity of 51 MT per annum.
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Ministry of Coal
The Ministry has identified more than 160 projects for private-sector participation towards
improving efficiency as well as scaling up production. The projects are expected to be
implemented over the next 2-3 years and include the following:
aMine developer and operator (MDO) model – 17 projects with total capacity of ~178 MTY (15 projects of CIL and 2 projects of NLCIL
aEstablishment of 3 washeries (BOO – Build, Own, Operate model)
a1 Coal gasification plant (BOO – Build, Own, Operate model)
a35 identified first-mile connectivity projects for building coal silos/ mechanised loading
aOperationalisation of 4 discontinued / abandoned projects
aCommercial auction of mines
28
Ministry of Mines
About 761 mineral blocks are expected to be put on auction over FY22-FY25 period. Year wise mineral blocks asset phasing is summarised in table below:
Table 14:
Phasing of Mineral Blocks
S.No.Category of Mineral blocks FY21—22 FY22—23 FY23—24 FY24—25
1
Fresh mineral blocks ready
to be auctioned
49 — — —
2
50 blocks of G4 level for
Composite License or CL
and 12 blocks of G2 / G3
level for Mining Lease or ML
62 (50 CL+12
ML)
62 (50
CL+12 ML)
— —
3
Non-working expired mines
(~50% of total 104 i.e. 52)
18 (Working
expired mines
which have
not been
auctioned)
26 26 —
4 Mines expiring till 2024 9 34 53 29
5
ML applications under
Section I0A(2B) (Total of
393 Nos.)
— 131 131 131
Total138 253 210 160
28 CMDPI (subsidiary of CIL) plans to explore/discover approximately five mines every quarter to the pool
of coal blocks available for auction. Accordingly, around 80 coal blocks are expected to be added in the
next 4 years. Valuation of the commercial auction has not been considered as it depends on the success
of the same.
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amount that may accrue to auctioning authorities typically depends upon the quality and
quantity of the resources, and the market prices during the lease period. Reserve positions
of many mines are not known at present and are yet to be ascertained by the State
Governments. Therefore, the information regarding estimated proceeds from auction of
such mineral blocks can be discovered only after the auction process is completed and
mining has commenced.
Approach to monetisation
The approach to monetisation has been anchored on the project assets identified by the line ministries for monetisation. The value has been phased out for the period FY 2022 to FY 2025 based on the year in which the project is planned to be awarded. The actual capex may be phased out across multiple years.
3.9.3 Indicative value of assets and phasing
The total indicative value of assets considered for monetisation is estimated at Rs 28,747
crore over FY 2022-25. About Rs. 22,625 crore of the assets are expected to be tendered out during FY 2022. However, the actual capex will be phased out across the next three years. The Monetisation value in the pipeline has been accordingly considered based on actual capex phasing assumed over 4-5 years, as set out in the figure below.
10,568
Figure 19: Phasing of Monetisation pipeline – coal mining (Rs crore)
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Summary
2518% Rs 20,782 crore 4%
Number of
AAI airports
considered for
monetisation
Assets planned
for monetisation
as % of existing
AAI airports
Indicative
Monetisation
Value over
FY22-25
Share in overall
NMP in value
terms (%)
3.10.1 Potential Asset Base
India has seen massive growth in the airport sector with investments from both the
government and private sector. The country has become the third-largest domestic civil
aviation market in the world and has immense potential to grow further. This calls for
higher investment to build new airports and augment the existing airport infrastructure
to support future growth.
The total Potential Asset Base considered includes airports under Airports Authority of
India (AAI) and its joint venture (JVs)
29
under the aegis of the Ministry of Civil Aviation. AAI
is a statutory body constituted by an Act of Parliament with the responsibility of creating,
upgrading, maintaining, and managing civil aviation infrastructure both on the ground and
air space in the country. AAI manages 137 airports
30
, including 24 international airports, 10
customs airports, and 103 domestic airports. In FY 2020, AAI airports handled ~160 million
passengers (international: 22 million and domestic: 138 million), which accounted for ~35%
of the total passenger traffic handled by airports in India. Over the years, AAI has made
significant strides in tapping private sector efficiencies in development, operations and
management of airports which has resulted in about 65% of passenger traffic throughput
being managed by private airports in India. PPPs in major airports such as Delhi, Mumbai
have contributed significantly in pushing the aviation sector ahead.
29 Assets held via other subsidiaries or JVs of AAI or entities directly under the purview of MoCA (as
applicable) have not been included. However these assets are proposed to be included as part of NMP
in due course as necessary.
30 https://www.aai.aero/en/corporate/organization#:~:text=During%20the%20year%202019%2D20,Interna -
tional%20452.46%20%26%20Domestic%20456.85%5D
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Airport monetisation through brownfield PPP models has been boosted in India by
the success stories of asset monetisation of four airports – Mumbai, Delhi, Hyderabad,
and Bengaluru. This is primarily in terms of improved user experience and increase in
value for all stakeholders. During FY 2020-21, 6 AAI airports were leased out to private
sector through PPP based model, namely, Ahmedabad, Lucknow, Mangalore, Guwahati,
Jaipur and Thiruvananthapuram and the assets are in process of getting handed over
to the operator. Further, this is backed by the presence of a strong regulatory and
contractual framework which has helped retain investor confidence.
Policy enablers – Government initiatives such as the introduction of the Airports
Economic Regulatory Authority (AERA) of India (Amendment) Bill, 2021, in the Lok
Sabha proposing amendment of the definition of ‘major airport’.
!Currently, 25 AAI airports have been considered for asset monetisation. Given their nascent stage of actual traffic and expected ramp-up period to achieve a minimum scale of operations, a strategy of bundling such airports with smaller airports is being explored.
!In order to enable bundling of airports as a bidding strategy, a bill for Amendment in AERA Act has been introduced during March 2021 in Lok Sabha with an intent to empower AERA to determine tariff for a ‘group of airports’.
!Government vision for the sector – The NIP has provided for capex of Rs
~90,000 crore over FY 2020-25 to scale up passenger handling capacity. For this, a number of projects for construction of new terminals, runways, taxiways, and parking facilities are being undertaken. Several airports are being developed under the Regional Connectivity Scheme-Ude Desh Ka Aam Nagrik (RCS-UDAN),
and terminal buildings are being expanded to improve amenities and passenger handling capacity. Development of the airport sector through PPP is one of the key areas of focus identified in the government’s NIP 2020.
3.10.2 Assets considered for monetisation
Twenty-five major AAI airports are considered for monetisation over FY 2022-25. The larger objective is to focus on monetisation of these 25 airports, while bundling of smaller airports may be explored based on market testing of transactions and investor feedback.
During FY 22, AAI has identified 6 airports in Tier 2/Tier 3 cities namely, Amritsar, Varanasi,
Bhubaneswar, Indore, Raipur and Trichy for the purpose of monetisation through brownfield
PPP models. To ensure commensurate development of non-profitable airports along with
the profitable airports with the help of private sector investment and participation, pairing
/clubbing of smaller airports with each of the six bigger airports and leasing out as a
package is being explored.
Further, divestment of AAI’s residual stake in four airport JVs has also been considered
under the monetisation pipeline. This includes the private sector operated airports in
Mumbai (26% stake), Delhi (26% stake), Hyderabad (13% stake), and Bangalore (13% stake).
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management of AAI.
Approach to monetisation:
Step 1 – Asset considered for monetisation: It includes a combination of large and
small airports, in line with the current monetisation plans of the Ministry of Civil
Aviation.
Airports with a threshold level of traffic: Scale is an important factor in determining
investor interest. Hence, airports having annual traffic above the threshold of ~0.4
million passengers (in FY 2019 and 2020) have been considered.
Airports with a sizeable ongoing/proposed capex plan as per the NIP have been
considered for monetisation. Such projects can be financed via the PPP mode.
Step 2 – Arriving at the indicative monetisation value
The ‘Capex approach’ has been considered for arriving at the Indicative Monetisation
Value. In the absence of availability of airport-wise capex, a normative assumption of
Rs 130 crore per million incremental passenger capacity (for moderate sized airports)
and Rs. 200 crore (for larger airports i.e. FY 19 annual passenger throughput of more
than 1 million) per million incremental passenger capacity has been considered. This
is in line with the capex per million passengers for select projects considered under
the NIP.
A ‘Market approach’ has been adopted for determining indicative valuation of AAI
stake in private JV airports. As per secondary sources and estimates based on recent
transactions involving sale of stake in Indian airports, the total indicative value of AAI’s
residual stake in the above-mentioned four JVs has been tentatively taken at ~Rs
10,000 crore
31
for inclusion in the pipeline. The valuation of AAI stake in JV airports is
only an indicative high level value and the actual price discovery will be made from
the market transaction. The actual realisation will depend on multiple factors such as
transaction timing, market conditions, investor appetite and transaction terms.
3.10.3 Indicative Monetisation Value of assets and phasing
The total value of assets considered for monetisation is estimated at Rs 20,782 crore for
FY 2022-25.
Out of this Rs. 10,000 crore of monetisation value has been tentatively considered on
account of divestment of AAI stake in private JV airports. The same has been phased out
equally over FY22 and FY23. It may be noted that the actual realisation from AAI stake
sale will depend on multiple factors such as transaction timing, market conditions, investor
appetite and transaction terms.
31 The values are indicative in nature. While the initial estimates pegged the value at ~Rs 16,000 crore,
a lower estimate has been taken consider13ing the adverse impact of Covid-19 and related travel
restrictions
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of 25 airports identified for monetisation. Based on assumptions explained above, the total
estimated capex towards the 25 airports is estimated to be Rs.13,945 crore. However, the
actual investment towards the augmentation will be phased out over 2-3 year period and
in certain cases in phases. Since the same cannot be reasonably determined at this point
in time, for the purpose of NMP, the actual investment has been assumed to be phased
out over 3 year period from the target year of award. Hence, during the NMP period
of FY22-25, monetisation value of Rs. 10,782 crore has been considered on account of
estimated capex towards identified airports. The phasing considered for capex towards
identified airports is as per table below:
Table 15:
Assumed phasing considered for capex of identified airports
ParameterFY 2022 FY 2023 FY 2024 FY 2025
Phasing of 6 airports with target award in FY22 720 1,440 1,440 —
Phasing of 8 airports with target award in FY23 — 859 1,718 1,718
Phasing of 6 airports with target award in FY24 — — 839 1,677
Phasing of 5 airports with target award in FY25 — — — 371
Total720 2,299 3,996 3,767
It may be noted that under PPP based mechanisms, based on final transaction structure
for the projects, there could be additional revenue streams to AAI as an authority such as
passenger fees, upfront premium or any other charges to authority. The same have not
been factored in the indicative monetisation value.
Figure 20: Phasing of Monetisation pipeline – airports (Rs crore)
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S.No. City / Airport
Estimated
Capex (Rs cr)
S.No. City / Airport
Estimated
Capex (Rs cr)
6 Airports in FY22 3,6006 Airports in FY24 4,193
1 Bhubaneswar 9001 Chennai2800
2 Varanasi5002 Vijayawada600
3 Amritsar5003 Tirupati260
4 Trichy7004 Vadodara245
5 Indore4005 Bhopal159
6 Raipur6006 Hubli130
8 Airports in FY 23 4,2955 Airports in FY25 1,857
1 Calicut5621 Imphal253
2 Coimbatore5002 Agartala418
3 Nagpur4003 Udaipur491
4 Patna10004 Dehradun566
5 Madurai6945 Rajamundhry 130
6 Surat301
7 Ranchi708
8 Jodhpur130
25 Airports in Tier 2 & 3 cities spread pan India
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airports
Sl. No. Airport
Existing Annual
capacity (million
pax)
Traffic–
FY19 (million
pax)
Traffic–
FY20 (million
pax)
1 Chennai21.0022.5422.27
2 Bhubaneswar4.504.163.67
3 Calicut2.193.363.23
4 Coimbatore2.503.002.84
5 Varanasi2.502.793.01
6 Amritsar2.502.522.46
7 Trichy1.501.581.61
8 Imphal1.731.281.29
9 Vijaywada2.001.181.13
10 Tirupati1.000.830.83
11 Nagpur3.002.803.06
12 Patna5.004.064.53
13 Madurai1.281.521.42
14 Surat1.101.241.52
15 Indore3.003.162.92
16 Ranchi1.462.252.49
17 Raipur2.002.032.12
18 Agartala0.911.441.51
19 Udaipur0.551.391.25
20 Dehradun0.461.241.33
21 Vadodara1.281.161.10
22 Bhopal1.280.811.33
23 Jodhpur0.500.510.57
24 Hubli1.000.460.48
25
Rajahmundry1.000.440.41
Source: AAI
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Summary
31 projects in 9 major
ports
Rs. 12,828 crore2%
Number of development
projects planned in
major ports
Total Indicative
Investment over FY
2022-2025 (Rs crore)
Share in overall NMP in
value terms (%)
3.11.1 Potential Asset Base
India comprises a significant size maritime sector with 12 Major and 200+ Non-Major Ports
situated along its 7500 km long coastline and a vast network of navigable waterways. The
country’s maritime sector plays a crucial role in its overall trade and growth, with 95% of
the country’s trade volume and 65% of the trade value being undertaken through maritime
transport. Port development in India is guided by the flagship Sagarmala programme
32
and the recently unveiled Maritime India Vision 2030.
Maritime India Vision 2030
Maritime India Vision 2030 (MIV 2030) is a ten-year blueprint for the maritime sector that was released by the Prime Minister of India at the Maritime India Summit in February 2021. It aims to boost waterways, give a fillip to the shipbuilding industry and encourage cruise tourism in India. With the objective of propelling India to the forefront of the global maritime sector, the Ministry of Ports, Shipping and Waterways formulated the MIV 2030, a blueprint to ensure the coordinated and accelerated growth of India’s maritime sector over the next decade. MIV 2030 has been formulated in consultation with over 350 public and private sector stakeholders, comprising ports, shipyards, inland waterways, trade bodies and associations, national and international industry and legal experts.
32 Sagarmala is the flagship programme of the Ministry of Shipping to promote port-led development in
the country
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A total investment cost of over INR 33,400 Cr. has been envisaged for this capacity
expansion. Out of this, approximately 95% capacity expansion is likely to be planned
under Public Private Partnership (PPP)/ Captive mode by Major Ports
33
.
With 12 major ports, the aggregate asset capacity under the purview of Central line
ministry (MoPSW,) directly held by the Port Trusts
34
is around 1,494 MMTPA, as on March
31, 2020
35
. Of this, the total capacity under PPP mode/ captive use is estimated at around
664 MMTPA (~44% of total capacity), while the capacity under the purview of respective
Port Trusts is around 830 MMTPA (~56% of total capacity).
3.11.2 Assets considered for monetisation
The assets considered for monetisation from FY 2022 to 2025 are spread across 9 of the 12
major ports. Towards this, 31 projects have been identified for private sector participation
for improved operational efficiency and capacity utilisation of existing port assets.
Approach to monetisation
In the case of port assets, monetisation potential has been arrived at based on key development and maintenance projects envisaged over FY 2022-25 for private sector investment through PPP mode. Key projects include additional berths, mechanisation, development of oil jetty, container jetties, O&M of container terminal, O&M of International cruise terminal and development of marina. The proposed capex (in Rs crore), as estimated by the Ministry of Ports, Shipping & Waterways, has been taken as the basis for estimation of indicative monetisation value. Further, the actual capex outlay has been assumed to take place over a three year period from the date of expected award and in certain cases in two phases.
The primary model for monetisation of ports and shipping assets is by way of grant
of PPP concessions.
3.11.3 Indicative Monetisation Value of assets and phasing
The total estimated capex towards 31 identified projects considered for monetisation is
estimated at Rs 14,483 crore for FY 2022-25. Out of 31 projects, 13 projects with expected
capex of Rs. 6,924 crore are envisaged to be tendered out in FY 2022, followed by another
10 projects with expected capex of Rs. 4,680 crore are envisaged to be tendered out in
FY 2023.
However, the actual investment towards the development of assets will be phased out
over a defined time period as laid out under the contract. Since the same cannot be
33 MIV 2030 document
34 Additional assets held via subsidiaries or JVs have not been included.
35 IPA Yearbook 2019-20
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has been assumed to be phased out over 3 year period from the target year of award.
Hence, during the NMP period of FY22-25, monetisation value of Rs. 12,828 crore has
been considered on account of estimated capex towards identified the 31 projects.
Table 18:
Pipeline of Ports projects over FY22-25
S.No.Port
Total No of
Projects
FY22 FY23 FY24 FY25
1 Paradip Port4 22
2 Deendayal Port (Kandla)4 2 2
3 JNPT(Mumbai)3 1 2
4 Mormugao Port3 1 2
5 Mumbai Port 2
6
Shyama Prasad Mukerji Port
Kolkatta (Khidderpore)
4 11 2
7
Shyama Prasad Mukerji Port
Kolkatta (Haldia)
3 1 1 1
8 Visakhapatnam Port4 1 2 1
9
V. O. Chidambaranar Port
(formerly Tuticorin)
3 2 1
10 New Mangalore Port11
Total31 13 10 3 5
FY 2022 – A total of 13 projects adding up to Rs 6,924 crore are envisaged to be awarded
during FY 2022. The monetisation pipeline phasing represents the year in which a certain
project is envisaged to be tendered out and the actual capex investment is likely to happen
in phases during the initial years in the envisaged concession period.
Table 19:
Port Projects to be tendered out during FY2021-22
S. No.Project NamePort
Estimated
Investment
(Rs. Cr.)
Target
award
1, 2
Deepening and optmisation of
Inner Harbour facilities including
development of Western dock Captive
berth (1 nos) to handle cape size vessel
Paradip Port 3,005z Jan,2022
3
O&M of Mumbai International cruise
terminal
‘Capacity-10 L pax pa
Mumbai Port 495 Sep,2021
4
Mechanization of Berth No. 2 (erstwhile
No.3 (PPP))
SMP, HDC 332 Mar,2022
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Estimated
Investment
(Rs. Cr.)
Target
award
5
Conversion of 2 Berths as container
Jetty at Kidderpore dock (PPP)
SMP, KDS
96
(Phase-1), 86
(Phase-2)
Jan ,2022
6
O&M of Proposed Mormugao Port
International Cruise Terminal (PPP)
Mormugaon
102 (EPC),
22 (PPP)
Dec, 2021
7 Oil Jetty No. 9Kandla 123 March,2022
8
Berth No.14 Mechanized Fertilizer
Handling Facility
Kandla 300 Dec,2021
9 Container TerminalJNPT 863 Sep, 2021
10 Berth No. 9VOCPT 435 Sep,2021
11 NCB-III BerthVOCPT 420 Dec, 2021
12 WQ-7&8
Visakhapatnam 288 Jan, 2022
13
Development of Marina
(PPP),Capacity:300 yacht
Mumbai 357 Oct, 2021
Total (FY22)6,942
FY 2023 to 2025 – A total of 18 projects adding up to Rs 7,168 crore are expected
to be awarded during the period. The phasing represents the year in which a
certain project is envisaged to be tendered out; the actual capex investment is
likely to happen in phases during the envisaged concession period.
Table 20:
Port Projects to be tendered out during FY2023-25
SNProject NamePort
Estimated
Investment
(Rs. Cr.)
Target
award
1Berths 1,2,3&4VOCPT 2,144 FY22-23
2 Development of Additional Liquid
Cargo Jetty
JNPT181 FY22-23
3 Redevelopment of Berth No. 9 and 3
barge berths
Mormugaon 700 FY22-23
4 O&M of Berth Nos. 10& 11 on PPP Mormugaon 200 FY22-23
5 Mechanization of EQ-7 berth Visakhapatnam 200 FY22-23
6 Mechanization of WQ-6 berth Visakhapatnam 250 FY22-23
7 Mechanisation of Berth No. 10 SMP (HDC) 350 FY22-23
8 Oil Jetty No. 10DPT (Kandla) 123 July ,2022
9 Oil Jetty No. 11DPT (Kandla) 362 Nov, 2022
10Operationalization of Coastal Berth JNPT170 July,2022
Sub-total (FY23)4,680
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Estimated
Investment
(Rs. Cr.)
Target
award
1Mechanization of EQ-6 berth Visakhapatnam 250 FY23-24
2 Strengthening and Mechanization of
Berth 7,8 NSD on DBFOT basis
SMP (KDS) 340 FY23-24
3 Mechanisation of Berth No. 5SMP (HDC) 325 FY23-24
Sub-total (FY24)915
1Mechanization of CQ1 & CQ2 Berths Paradip 1103 Sep, 2024
2 Berth 9,10&11New Mangalore 200 FY24-25
3 Mechanization of Berths 4 & 5 NSD
on DBFOT Basis
SMP (KDS) 270 FY24-25
4 Construction and mechanisation
of container berths at NSD outer
Terminal
SMP(KDS) 298 FY24-25
5 Mechanization of SQB BerthParadip 75 FY24-25
Sub-total (FY25)1,946
Figure 21: Monetisation pipeline phasing – Ports (Rs crore)
Factors influencing monetisation of asset class
The ports sector has witnessed many policy initiatives over the last decade to revive
investor interest and facilitate asset recycling. Key actions include:
!100% FDI permitted under the automatic route
!Central government has already taken multiple initiatives like Major Port Authorities Act 2021 which enables Major ports to move from a service model to a landlord model and bring in more private sector participation to drive operational efficiency.
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!Major Port Authorities Act 2021 enables Major ports to transform effectively for
the future. Key areas to be implemented on the ground as per the Major Port
Authorities Act 2021 are
36
:
Image source : Maritime India Vision document, 2030
!An evolved framework and MCA for PPP projects in major ports was approved by the Cabinet in 2018 to make investments in the ports sector more attractive. The amendments approved by the Cabinet include dispute resolution mechanism (SAROD
37
–Ports), relaxed exit clause for developers.
i. Constitution of the SAROD–Ports as a dispute resolution mechanism similar to the SAROD in highways sector
ii. Concessionaire to pay royalty on “per MT of cargo / TEU handled” basis; this would be inflation-indexed annually, with port operator to pay royalty on actual and not notional income. Ministry has recently constituted an empowered committee to review the MCA and recommend amendments (if any).
iii. Providing an exit route to developers for complete stake sale post two years of project completion date
These initiatives will help usher in increased private sector interest and also result in improved operational efficiencies with reduction in turnaround time at Major Ports.
36 maritime-india-vision-2030.pdf (maritimeindiasummit.in)
37 SAROD – Society for Affordable Redressal of Disputes is a dispute resolution mechanism similar to
SAAROD in the highways sector
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Summary
2 National stadiums and
2 regional centres
Rs 11,450 crore2%
Assets planned for
monetisation in FY22-25
Indicative monetisation
value in FY22-25 (Rs crore)
Share in overall NMP in
value terms (%)
3.12.1 Potential asset base
The total potential asset base considered are the assets under the Sports Authority of
India (SAI) under the aegis of the Ministry of Youth Affairs & Sports. The assets are largely
managed under the Sports Authority of India (SAI) and categorised into three broad
categories – stadiums (managed by the Stadia division), regional centres and academic
institutions. The focus of monetisation is on the stadiums and regional centres.
The Stadia division is responsible for formulating policy guidelines for the utilisation of
five SAI stadiums in Delhi, having different facilities created with the twin objective of
broad-basing sports and to achieve excellence in sports. The five stadiums include: (i)
Jawaharlal Nehru Stadium Complex, (ii) Indira Gandhi Sports Complex, (iii) Dr. Shyama
Prasad Mukherjee Swimming Pool Complex, (iv) Major Dhyan Chand National Stadium
and (v) Dr. Karni Singh Shooting Range.
The SAI regional centres/sub-centres and academic institutions are the implementing
agencies for its sports promotional schemes and academic programmes across the
country. The 10 regional centre assets include (i) SAI Netaji Subhas Eastern Regional
Centre (NSEC), Kolkata; (ii) SAI Netaji Subhas Southern Centre (NSSC), Bengaluru; (iii)
SAI Netaji Subhas Western Centre (NSWC), Gandhinagar; (iv) SAI Udhav Das Mehta (Bhai
ji) Central Centre, Bhopal; (v) SAI Ch. Devi Lal Northern Regional Centre, Sonipat; (vi)
SAI Regional Centre, Chandigarh; (vii) SAI Netaji Subhas North-East Regional Centre,
Imphal; (vii) SAI Regional-Centre, Lucknow; (ix) SAI Regional-Centre, Guwahati; and (x)
SAI Regional Centre, Mumbai.
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World class sports infrastructure: Sports stadiums not only serve as playing venues but
also are centres of training and excellence in sports. Large infrastructure facilities host
several international events, and maintaining these venues after the events are over
or in between events is a challenge globally. Stadia fall to disrepair and disuse due to
lack of foresight across the life cycle of a stadium. Over the last few years, the sports
industry has witnessed a transformation with growing sophistication in infrastructure
needs, increased visibility of competitive sports and emergence of sports as a business
proposition. Recently, India has made proactive efforts to host numerous mega sporting
events. Majority of sports stadia in India require better utilisation, revitalisation of sports
usage and upgradation of infrastructure.
Brownfield PPPs in sports infrastructure: There is a pressing case for PPPs in sports’
infrastructure development in India to augment and maintain sports facilities and for
tapping private sector efficiencies in management of infrastructure. An integrated
multi-use sports infrastructure development model, focusing on optimisation of sports
facilities by hosting sporting and non-sporting events, upgrading sports infrastructure
technology and mixed-use urban development, can drive the provision of world class
sports infrastructure. Limited funding avenues for sports and lack of state-of-the-art
facilities make a strong argument for attracting private capital in sports infrastructure
development through brownfield PPP models. Under a PPP framework, private sector
efficiencies in design and management can revitalise the facilities and usage.
Sports facilities have strong latent demand: The existing sports stadiums provide
infrastructure for user groups that pursue sports as a career. There is a strong demand
for sports facilities that tap an additional user segment who play games/sports for
entertainment, fun, and rejuvenation. Investments in sports, leisure and such recreational
facilities have a positive impact on the regeneration of urban centres, including:
!Building a strong community spirit
!Providing opportunities for young people to develop lifelong skills
!Increasing the motivation and self-esteem of young people
!Attracting people from outside the area to work and participate in newly developed communities
!Improving the health and lifestyle of people in the local community
!Increasing the economic profile of the area
3.12.2 Assets considered for monetisation
The assets considered for monetisation during FY 2022-2025 cover 2 national stadiums (JLN and one more national stadium to be identified) and 2 SAI regional centres (at Bangalore & Zirakpur). The mode of monetisation for the identified assets will be PPP based concessions on OMDA model.
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actual capex may take place over a 3-4 year period. Further, any concession fee, upfront
premium and revenue share payments to authority are over and above this indicative
monetisation value and will be discovered based on market testing with transaction.
Approach to monetisation
The assets considered for monetisation include specific assets for which ministry has identified specific plans towards the development of the facilities under brownfield PPP mode. Capex approach has been adopted to determine the indicative monetisation value for stadium assets. The estimated capex has been considered as the approach to estimate the monetisation value. This is only an indicative value at this stage and actual valuation will be arrived at based on detailed feasibility and transaction preparation stage.
3.12.3 Indicative Value of assets and phasing
The total value of assets considered for monetisation is estimated at Rs 11,450 crore for FY 2022-2025, with capex phasing as follows:
aFY 2022 –Rs.1,650 crore
aFY 2023 – Rs 2,100 crore
aFY 2024 – Rs.3,200 crore
aFY 2025 – Rs.4,500 crore
3.12.4 Marquee project: Development of JLN Stadium
Jawaharlal Nehru (JLN) Stadium in New Delhi is expected to be a pioneer in creating a financially sustainable sporting model in India through an OMDA-based PPP concession agreement for integrated development with shared usage of sports facilities. There is a pressing need for financial sustainability in sports and to explore mixed-use areas that are connected and accessible to promote sporting culture. Hence, the PPP framework is being explored to tap private sector efficiencies in design and management, which can revitalise the facilities and optimise usage.
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S.No. Facility Seating/Capacity
1 Main Arena 60,000 (fixed)
2 Auditorium 2,172 (fixed)
3 Hostel complex 140 rooms + 100 u/c
4 Indoor sports Table Tennis (2)
5 On Ground
facilities
2nd Football
ground, Archery,
Cricket practice net,
Volleyball, Handball
Responsibility SAI Operator
Site access √
Bid Procedure and criteria
√
Set the design & specs
√
Contract monitoring √
Commercial revenues
√
SPorting zone revenues
√ √
O&M√
Figure 22: Snapshot of the JLN stadium asset (New Delhi)
OMDA-based model for monetisation of sports stadiums/
complexes
Rationale
The PPP concept envisages that the selected PPP concessionaire will be given the
rights for development and commercialisation of the sports facility through an OMDA.
The project structure envisages grant of a concession to a private operator to operate,
maintain and augment or redevelop and upgrade the existing facilities at the stadium.
As part of the concession, the private partner may be granted development rights at
the site subject to compliance with applicable local laws.
Salient features of the OMDA-based PPP model
Scope: The scope of such concessions would entail getting the existing asset at site into
the specified condition over an initial development period; developing, operating and
maintaining an additional infrastructure at a designated site; operating and maintaining
the asset for the concession period followed by transfer back of the asset at the end
of the concession in the specified condition. The nature of additional infrastructure
may be specified upfront and should be complementary to the existing site usage.
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A concession period of 30 years may be explored, extendable by another 30 years
subject to asset life and viability considerations.
Revenue streams for concessionaire
!Commercial lease rentals
!User fees from sports facilities (sports club and memberships)
!Space renting for sports/ non-sports events and food and beverages for events
!Parking, entry fees, advertisements, etc
Authority’s users and events
!Year-round access to the authority’s designated users and campers at regulated
charges
!Pre-specified event roster and event day-sharing for the authority’s sports and other events
Authority revenue
!Revenue share
!Annual concession fee
!Upfront premium
Indicative transaction structure of OMDA-based sports stadiums/ complex is depicted in the exhibit below.
Concessionaire / SPV
Design & upgradation of all facilities
Financing the augmentation O&M of
entire facility Revenues from mix use
Handback of asset at the end
Authority
Site access
Approvals & clearances
Regulation of Sports zone
Contract monitoring
Commercial Rentals (Sports Zone
& non-sports Zo ne)
Parking, space rent out, F&B
revenues, Club membership
Addl. Revenue streams could be
specified in the agmnt.
Revenues
Escrow & Substitution rights
Specified
Revenue Share
End-Users
Bid variable:
Upfront premium (payment
schedule given by Authority
in the CA)
Flow of funds
Contractual
arrangement
Lenders Investors
Sports + Commer
cial
Grant of co ncession
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Redevelopment of Colonies
Ministry of Housing & Urban Affairs (MoHUA) owns and manages land through the Land
and Development Office (L&DO). During the NMP period, the following projects pertaining
to redevelopment of colonies are being envisaged. PPP based model is recommended for
redevelopment of such GPRA projects cross subsidized through sale / lease of commercial
BUA.
Proposed projects are real-estate projects which envisage mixed use redevelopment of a
vacant tract / brownfield sites at prime locations in Delhi–NCR. They entail development
of general pool residential accommodation and commercial office complexes in one of
the most prime areas of the country through a self-funded mechanism.
Considering the prime location and attractive commercial potential of the Project,
development of these projects is recommended through private sector participation. This
will not only enhance the commercial and operational efficiencies but also ensure upfront
/ periodic consideration to the Authority / Ministry of Housing and Urban Affairs.
Table 21:
Identified projects–Redevelopment of Colonies
Housing redevelopment Assets
CategoryLocations / particulars
Estimated Investment
(Rs crore)
Redevelopment of 7 General
Pool Residential Accommodation
(GPRA) Colonies in Delhi
Sarojini Nagar
Naoroji Nagar
Netaji Nagar
Sriniwaspuri
Thyagraj Nagar
Mohammdpur
Kasturba Nagar
32,276 crore
Development of residential /
commercial units on 240 acre
land in Ghitorni (Delhi) 8000 units of GPRA
3000 units for migrant
construction workers 15,000 crore
Under a PPP based model for such projects, the entire land parcel should be transferred
into an SPV owned by the Authority with requisite change of land use etc wherever
required. Multiple statutory clearances are typically required for such Projects which
should be pre-obtained by the Authority and housed in the SPV. The SPV should then be
bid out under PPP mechanism through a transparent competitive bidding system.
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The total asset universe considered for the exercise are the hotel assets under the central
sector agencies India Tourism Development Corporation (ITDC) under administrative
control of the Ministry of Tourism. ITDC is running hotels, restaurants at various places
for tourists, besides providing transport facilities. The present network of ITDC consists
of 4 Ashok Group of Hotels, 4 Joint Venture Hotels, 7 Transport Units part of the travel
& tourism infrastructure, 14 Duty Free Shops at Seaports, 1 Sound & Light Show and 4
Catering Outlets. The hotel assets under ITDC comprise of the following:
Table 22:
Identified projects–ITDC Hotel assets
S.NoHotel NameLocation
1 Hotel PondicherryPuducherry
2 Hotel KalingaBhubaneshwar
3 Hotel RanchiRanchi
4 Hotel NilachalPuri
5 Hotel Anandpur SahibRupnagar
6 Hotel SamratNew Delhi
7 Hotel AshokNew Delhi
8 Hotel Jammu AshokJammu
ITDC is exploring monetisation of its properties which have been considered under the
monetisation pipeline. Major assets which are under various stages of discussion as
following:
Joint leasing of Hotel Pondicherry Ashok, Puducherry
O&M contract for Hotel Kallinga Ashok, Bhubaneshwar
Divestment of Hotel Ranchi Ashok, Ranchi
Divestment of Hotel Nilachal, Puri
Transfer of ownership of Anandpur Sahib Hotel
Subleasing of Hotel the Ashok, New Delhi
O&M contract for Hotel Samrat, New Delhi
O&M contract for Hotel Jammu Ashok, Jammu
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Potential to leverage the Brand Value of Ashok Group – The Ashok group of hotels is
the flagship hotel chain under ITDC which have a brand value developed over last 40-
50 years and has been the centre stage for all government events organised by various
ministries and public sector entities. The Ashok hotels has been the key part of major
Conferences, Exhibitions, Workshops/ Seminars and other National and International
events organised.
Government push for underutilised assets – ITDC chain of hotels being placed at ~125
acres of land parcels spanning across major cities across the country have not been
utilised to their maximum potential.
Strategic Location Advantage – ITDC hotels have the location advantage as majority
of the hotels are placed at the heart of the city in prime locations (Hotel the Ashok,
Hotel Samrat, Hotel Kalinga etc.).
All 8 hotel assets of ITDC have been considered for monetisation during FY 2022 to 2025.
Long-term leasing, divestment, long term OMT contract may be explored as potential
models for monetisation to be ascertained on a case to case basis as per detailed asset
level due diligence.
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Plan
4
This section highlights
the framework for
monitoring progress
of transactions
forming part of
the NMP.
Implementation Plan 95
vol-2_National Monetization Pipeline.indd 95vol-2_National Monetization Pipeline.indd 9517/08/21 12:11 PM17/08/21 12:11 PM Successful implementation of NMP hinges on an effective governance framework with
escalation matrix for real time monitoring of progress. This will help all stakeholders
in monitoring the implementation of projects by comparing actual progress vis-a’-vis
planned pipeline for the NMP assets. Which in turn will ensure effective programme
implementation. The figure below captures the monitoring and evaluation tools available
with an objective to help all stakeholders monitor the implementation and progress of the
NMP projects. Real time monitoring will be undertaken through the asset monetisation
dashboard, as envisaged under Union Budget 2021-22.
The basic elements of the monitoring and evaluation framework are highlighted in figure
below.
Figure 23: Implementation framework
The programme is envisaged to be supported through necessary policy and regulatory interventions by the Government in order to ensure an efficient and effective process of asset monetisation. These will include streamlining operational modalities, encouraging investor participation and facilitating commercial efficiency, among others. Union Budget 2021-22 has been a witness to commitment of the Government in this regard.
Further, the initiative mandates adoption of innovative models and extensive private
sector collaboration, which in turn necessitates augmentation of knowledge base and
capacity at the sponsoring ministries/ public sector entities level. Such knowledge and
capacity is proposed to be shared across ministries/ public sector asset owners, in form
of guidance material, model documents etc so as to avoid redundancies and to ensure
value accretive transactions. The end objective of this initiative to enable ‘Infrastructure
Creation through Monetisation’ wherein the public and private sector collaborate, each
excelling in their core areas of competence, so as to deliver socio-economic growth and
quality of life to the country’s citizens.
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Annexure 97
vol-2_National Monetization Pipeline.indd 97vol-2_National Monetization Pipeline.indd 9717/08/21 12:11 PM17/08/21 12:11 PM ANNEXURE I: KEY NH STRETCHES TO BE MONETISED OVER FY
2022-2025
North regionStateLength (km)
Hissar–DabwaliHaryana47
4 laning of Hissar–Dabwali (2 pkgs)Haryana 145
6 laning of Panipat-Jalandhar existing Saraswati bridge Haryana1
6 laning Eastern Peripheral Expressway (Pkg 1)Haryana22
6 laning Eastern Peripheral Expressway (Pkg 3)Haryana25
Jammu bypass–UdhampurJ&K65
Chenani–NashriJ&K12
Jhansi ShivpuriUP / MP35
Indore–KhalghatMP80
Lakhnadon–MahagaonMP57
Patiala bypass-Sangrur bypassPunjab61
Sangrur bypass (BP)–Tapa incl. Sangrur & Dhanuala BPPunjab59
Farukhanagar–Kottakatta (NS 2 / AP 3)Haryana46
Farukhanagar–Kottakatta (NS 2 / AP 4)Haryana33
Agra bypassUP33
6 laning Eastern Peripheral Expressway (pkg 2)Haryana25
6 laning Eastern Peripheral Expressway (pkg 4)Haryana22
6 laning Eastern Peripheral Expressway (pkg 5)Haryana21
6 laning Eastern Peripheral Expressway (pkg 6)Haryana22
Agra BharatpurUP / Rajasthan 45
Orai BaraUP61
Cable stayed bridge at Naini and approachUP4
Fatehpur KhokharajUP58
Chakeri UsraniaUP21
Allahabad–Handia–VaranasiUP72
Chhindwara–Amarwara incl. Chhindwara ORR sectionMP123
Chhindwara (from Ring Road)–SeoniMP61
Amarwara–NarsinghpurMP70
Amritsar–WagahPunjab36
Total29 stretches 1361 km
East regionState Length (km)
Hazipur-Muzaffarpur on NH-77 and NH-28Bihar39
Chas-Ramgarh (2 sections)Jharkhand 77
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Sunakhala–BhubaneshwarOrissa76
Bhubaneshwar–PuriOrissa59
Palsit–DankuniWest Bengal 64
Panagarh–PalsitWest Bengal 67
Purnea–Dalkhola
West Bengal /
Bihar
36
Dalkhola–IslampurWest Bengal 88
Islampur–Sonapur–GhoshpukurWest Bengal 44
Salsalabari to West Bengal Assam borderWest Bengal 26.5
Kotwa–Mehsi–MuzaffarpurBihar80
Khagaria–PurneaBihar70
Muzaffarpur–SonbarsaBihar142
Chandikhol BhadrakOrissa75
Aurangabad–BarachettiBihar60
Gorhar–Barwa AddaJharkhand 79
Bhadrak BalasoreOrissa63
Barachetti–GorharBihar80
Chandikhol ParadipOrissa77
Mokama MungerBihar69
Shillong bypassAssam49
Total22 stretches 1478 km
West regionState Length (km)
Chittorgarh-Kota and Chittorgarh bypassRajasthan 161
Palanpur-Abu RoadGujarat / Rajasthan 45
Abu Road–SwaroopganjRajasthan 31
Vadodara–Surat Gujarat7
Bharuch–Surat (6 lane) (BOT-II)Gujarat 65
Bharuch–Surat (6 lane) (BOT-I)Gujarat 83
Saoner-ChindwaraMaharashtra 76
Deodhari-Kelapur
Gujarat /
Maharashtra
30
Borkhei-Wadner-Deodhari
Gujarat / MP
border
86
Kelapur-Maharashtra/Telangana borderMaharashtra 23
Pimpalgaon Nashik GondheMaharashtra 57
MP/Maharashtra border-DhuleMaharashtra 89
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Kondhali-TalegaonMaharashtra 50
Talegaon-AmravatiMaharashtra 58
Baran-ShivpuriRajasthan/MP 121
Reengus-SikarRajasthan 44
Jaipur-KishangarhRajasthan 90
Bharatpur–MahuaRajasthan 57
Mahua–JaipurRajasthan 108
Jaipur-ReengusRajasthan 52
Suratgarh–Sri GanganagarRajasthan 78
Kota to Chittorgarh (RJ-7 and RJ-8)Rajasthan 128
Rajasthan & Gujarat Palanpur-SwaroopganjGujarat / Rajasthan 76
Kota-Baran-Shipuri–Jhansi
Rajasthan / MP /
UP
300
Total25 stretches 2031 km
South regionState Length (km)
Kothakota Bypass–KurnoolA.P.75
Maharashtra/Karnataka border to BelgaumKarnataka 78
Hyderabad-Bangalore (6 sections)A.P. / Karnataka 251
Chikalurper–Vijaywada (6 laned)A.P.68
AP/Karnataka Border–DevanhalliKarnataka 72
Nandi Hill crossing & Devenhalli to Meenu Village AP/KA
border
Karnataka 61
6 laning of Bangalore-Hosur section of NH-7Karnataka 14
AP/KA border–Nandi Hill crossing & Devenhalli to Meenu
kunte Village
Karnataka 61
Ulundurpet–Padalur (pkg VI B)Tamil Nadu 94
Ulundurpet–Tindivanam (pkg VI A)Tamil Nadu 73
Trichy–Padalur (pkg VI C)Tamil Nadu 38
Krishnagiri–Thopurghat (NS 2 / TN 1)Tamil Nadu 63
6 laning of Hosur–Krishnagiri Tamil Nadu 60
Kadtal-ArmurTelangana 31
Adloor Yellareddy–CheguntaTelangana 52
Chegunta–BowenpallyTelangana 62
MH/AP border to Islamnagar (NS-2 / BOT / AP-8)A.P.55
Farukhanagar–Kottakatta (NS 2 / AP 3)Haryana46
Farukhanagar–Kottakatta (NS 2 / AP 4)Haryana56
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Kadloor Yellareddy to Gundla PochampaliTelangana 86
Hyderabad-Bangalore (NS-2 / BOT / AP-7)
Karnataka /
Telangana
75
Tambaram–TindivanamTamil Nadu 46.5
Hadadi–Devgiri
Karnataka /
Maharashtra
80
Hadadi–DoddasiddanahallyKarnataka 71
Gabbur–DevgiriKarnataka 64
Hattargi – HirebagewadiKarnataka 22
Trichy–Karaikudi including Trichy bypass (2 sections) Tamil Nadu 117
Total28 stretches1,931 km
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NITI Aayog
Designed by
NATIONAL
MONETISATION
PIPELINE
VOLUME II: ASSET PIPELINE
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