Source: The Economic Times, Jul 04, 2017
NEW DELHI: The government is mulling leasing out operational roads, airports, ports and other infrastructure assets to private operators to attract investments and free up funds to step up public investment in greenfield projects.
Niti Aayog, the government’s think tank, will prepare a list of projects that can be offered to the private sector and move a note for discussion on the issue.
Private investment in greenfield infrastructure has almost stalled because of multiple execution risks involved and heavy indebtedness of infrastructure companies.
“This (move) will free up capacity and funds for new investments,” said a senior government official. “Whatever projects are complete and there is a revenue stream coming, the government must get out of those and put them out in the market on a ‘reverse BOT’ (build-operate-transfer) basis,” the official added.
Niti Aayog has already identified state-run companies that the government will exit through strategic or outright sale. The government has also taken an in-principle decision to exit from loss-making and debt-burdened Air India.
The focus will now shift to individual projects with staterun agencies that are not up for disinvestment.
“These projects are de-risked. Moreover, operating and maintaining projects is not the government’s forte,” the official said, making a case for the government exiting operational projects.
The NHAI has already put out some operational projects for leasing through the toll-operate-transfer (TOT) model. This can be replicated for other sectors as well.
“There is a huge interest among foreign funds. They are not interested in picking up risk-laden greenfield projects, but brownfield operating ones. This is the right time for India to go for this as PM Narendra Modi’s global outreach has tickled their appetite to invest in the country,” said Vinayak Chatterjee, chairman, Feedback Infra.
ET had earlier reported that several Canadian funds, including Brookfield, Caisse de Dépôt et Placement du Québec (CDPQ) and PSP Investments, have evinced interest in investing in Indian road assets.
Chatterjee said there are successful examples of ‘reverse BOT’, such as the Mumbai-Pune Expressway, and that “it is eminently doable”.
Bringing in the private sector “can yield significant benefits where there is a gap in operational efficiency or where cash flows are visible,” said Manish Agarwal, partner and leader, infrastructure, PwC.
“Such performance-based contracts can generate positive value for government money, and also bring in long-term, low-cost capital,” he said, and pointed out that “this was one of the recommendations in the Kelkar committee report”.
There is healthy appetite among domestic investors as well. KNR Constructions is selling two road assets and many others are in the process of cashing out. Niti Aayog will seek the help of private sector experts in identifying operational public infrastructure projects that can be put up for outright sale or lease.
India has a huge appetite for infrastructure investment. According to finance minister Arun Jaitley, India needs $646 billion (about Rs 42 lakh crore) over the next five years to fund its infrastructure.