The government plans to raise Rs 6 lakh crore over the next four years for new infrastructure investments, of which Rs 88,000 crore is to come this year. The government plans to find money for new projects by leasing and buying back, not selling, thousands of kilometres of roads, transmission lines, pipelines, fibre networks, towers, also power projects, ports and airports.
The positive is that many of these are already up and running projects. Both government and the private sector is well-acquainted with the infrastructure investment trust (InvIT) process and there will be no teething issues like land acquisition and environment impact that we have seen in greenfield projects but there may still be challenges on how to value.
Jatin Aneja, head of projects and infrastructure practise at Shardul Amarchand Mangaldas, Sidharth Kapur, board member of Noida Airport and investment banker Rahul Mody, MD, head of infrastructure at Ambit Pvt Ltd, discussed the challenges.
“I think the template is set, what is key is that the regulatory framework is made clear but as long as that is done, I don’t see why this cannot be replicated in other infrastructure sectors such as railways or ports,” said Mody.
According to Kapur, the entire monetisation pipeline is very bold and audacious. “Definitely, it is an invitation to a party but there is a lot of work which needs to be done to make the party successful. As far as airports are concerned, we have a solid track record of privatisation of airports, so I don’t think that the airports may necessarily go through the InvIT route, they will go through the concessioning and the public-private partnership (PPP) route as was the case with earlier airports. Already, four major airports have been privatised. Over the last fifteen years, the regulatory framework has evolved and become much clearer and more transparent. I think airports should not be a problem, there should be adequate demand for these assets.”
Aneja said, “I agree with Sidharth Kapur. Roads and power grids should go the InvIT route. Ports and airports both would go the PPP route and we can follow that process. Some bit of challenge will be there in the railways in terms of stations, that can again go through the PPP route. The only thing is to figure out what is the revenue model over there exactly. There is a fair amount of upside in railways at least, the stations in terms of city side land monetisation, so that should also follow the airport process and do well.”
For the entire discussion, watch the accompanying video.