India Aims to Raise $81 Billion by Leasing Out Infra Assets

(Bloomberg) -- India plans to raise 6 trillion rupees ($81 billion) by leasing out state-owned infrastructure assets over the next four years to fund new capital expenditure without pressuring government finances.

The proposal involves handing assets including roads, railways, airports, sports stadiums, power transmission lines and gas pipelines to private operators, according to a National Monetization Pipeline document unveiled by Finance Minister Nirmala Sitharaman in New Delhi on Monday.

The plan is in line with Prime Minister Narendra Modi’s strategic divestment policy, under which the government will retain presence in only a few identified areas with the rest tapping the private sector. The program will free up the government’s budget money for infrastructure creation, while giving investors access to sectors such as railways that were until now a state monopoly. 

“It was very clear public expenditure in infrastructure will have to be increased,” Sitharaman said. “What the asset monetization pipeline does today is to take this entire thing to the next phase -- of public-private partnership.”

Ownership of the assets will remain with the government, she said, adding that private operators are required to hand them back to the state after the agreed period.

Shares of power distributors, gas utilities and energy companies surged Tuesday. The S&P BSE Oil & Gas Index rose as much as 2.1%, the most since May, to become the top performer among 19 sector indexes compiled by BSE Ltd. A gauge of utilities is up 1.3%, while a measure of power stocks climbed 1.3% as of 11:48 a.m. 

Revenue from monetizing roads is pegged at 1.6 trillion rupees, while that from railways is seen at 1.5 trillion rupees, said Amitabh Kant, the chief executive officer of government think-tank NITI Aayog. As many as 160 coal projects, 25 airports and 31 projects spread across nine ports will also form part of the pipeline, he said.

This is “a positive move in terms of fiscal dynamics,” Kanika Pasricha, an economist at Standard Chartered Plc., said, referring to the government’s plan to raise 880 billion rupees through the program in the current fiscal year. “Implementation needs close watch as this is monetization and ownership remains with the government.”

Income from the monetization plan, originally announced by Sitharaman in her annual budget speech in February, is key to narrowing the nation’s budget deficit, which is pegged at 6.8% of the gross domestic product in the financial year that began April 1. Several economists expect the country will miss that target due to economic disruptions caused by a second wave of the Covid-19 pandemic.

In addition, the government has budgeted as much as 1.75 trillion rupees from sale of stakes in state-run companies in the current fiscal year to make up for the pandemic-linked drop in tax revenue. That plan includes an initial public offering by Life Insurance Corp. of India as well as stake sales in companies such as Bharat Petroleum Corp. and Air India Ltd.

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