Monetisation Lessons From Nhai

Context: To develop an effective implementation programme for National Monetisation Pipeline, it is necessary to review previous successful and failed asset monetisation exercises.

Asset Monetisation Programme of National Highway Authority of India (NHAI)

• Undertaken in several ways: like Privatisation and strategic sale of government-owned assets, listing government-owned companies and diluting government stake.
  • In the context of brownfield public goods, such as completed roads, asset monetisation involves leasing out completed road projects to private or public investors.
  • Toll-Operate-Transfer Model: The investors pay an upfront value for the “lease” in return for the right to operate the road project and collect the tolls generated during the concession period.
  • In 2017, the Cabinet Committee on Economic Affairs approved the NHAI’s plan for monetisation of national highways using the Toll- Operate-Transfer (T-O-T) model.

Issues in Past Asset Monetisation Programme (based on T-O-T)

• Low quality of disclosure standards: deters future investors. For E.g., outcomes of monetisation exercise by NHAI were neither disclosed by NHAI nor by Ministry of Road Transport and Highways.
• Poor project preparation (in terms of assessments): As per the World Bank’s Benchmarking Infrastructure 2020 Report, India, with a score of 60 points (in project preparation), is behind South Africa, Colombia, Mexico and Vietnam.
  • The report also highlights the lack of affordability assessments and market sounding exercises,
• Short duration of concession period: i.e. 15-30 years, unlike other nations (50-75 year concessions), impacting the quality of projects delivered.
  • India ranks poorly on infrastructure quality in terms of connectivity and quality of roads (72^nd and 48^th) as per the World Economic Forum’s Global Competitiveness Report 2019.
• Low infrastructure asset management capacity: The World Bank’s benchmarking infrastructure report (2020) assigns a score of 42 to India, which is nearly 25% lower than the global average.

Way Forward

• Ensure systematic digitised disclosures: to attract a larger pool of bids, reduce corruption and link quality disclosures to a positive perception of government (as done by Ukraine).
  • The Budget promises a dashboard facility to track the progress of the assets that are henceforth included in the National Asset Monetisation Pipeline.
• Diversify risk of concessionaire: by combining projects of different risk levels into a single bundle.
• Ensure longer concession term: to incentivise the concessionaire to invest in higher quality standards.
• Outsource the management of completed assets: to ensure effective asset management.