National Monetisation Pipeline: How To Make This ‘PPP By The Side-Door’ Work

As told to BloombergQuint over the phone.

Let’s first take a look at the big picture. The National Investment Plan of Rs 20 lakh crore per annum requires the government to seriously think about resource raising – how it is going to be funded. One of the important pillars is asset monetisation or asset recycling, as was announced in the budget and mentioned in previous budgets as well. So, in terms of pure economics, I would commend the government for actually grabbing the bull by the horns, and would take what the Finance Minister has done as a big and bold step.

Such a recommendation of asset recycling was being made from the early 2000s – to the UPA I and II governments. While they nodded in agreement, nobody did anything about it. Therefore, many of us commentators felt this was an important resource-raising vehicle that was not being tapped. The fact that this government and the Finance Minister have actually moved ahead on this aspect of resource-raising in a big and bold way is to be commended.

The plan is also much larger than the budget announcement, which was an estimate of about Rs 3.5 lakh crore, and this is Rs 6 lakh crore. It is also much more wide-ranging. Earlier, the impression was that government would restrict itself to two or three sectors like highways, rail, and power. But now we see that have gone to stadia, real estate, and warehouses, which is good. Wherever there are operating assets, obviously, there is a monetary value embedded there. The broad stroke of the step has to be commended.

Earlier, one was under the impression that these would be asset sales – divestments. Now, one understands that the government would not sell the family silver but would actually issue out operating contracts—what in jargon is called concessions—which are in the nature of the public-private partnership framework, for the private sector to invest and operate these for whatever is the right duration… 40, 60 years.

Unfortunately, the market confidence among domestic and foreign investors in PPP formatting and level-playing field is on very slippery ground. The private sector today does not have the confidence, with all that has happened in the last two decades. This is why this government had set up the Vijay Kelkar Committee which submitted its report in November 2015. That report had a robust outlining of all the steps that were required to bring PPP formats into line with what is rationally expected by all the players including the government.

The apprehension now is that once you have got into this PPP business, then the PPP framework requires a huge amount of debate, discussion, and tweaking before we actually see money coming in, as we’ve seen recently in the very lukewarm bids for the private train operating contracts.

My last comment is that in anecdotal evidence and side-chats that I’ve had with many players who had earlier expressed great interest in the opportunity to operate railway trains, they have come up with the same grouse that is bedevilling most sectors – which is that private sector honestly wants a level playing field with this behemoth issuer of PPPs which is the sarkar, and therefore sees no better institutional mechanism than an independent regulator.

We have to put the horse before the cart. Revitalising and restructuring the PPP environment is important as issuing bids, to make the National Monetisation Pipeline successful.

Vinayak Chatterjee is Co-Founder and Chairman of Feedback Infra; and Chairman of CII National Committee on Infrastructure & PPP.

The views expressed here are those of the authors, and do not necessarily represent the views of BloombergQuint or its editorial team.