Union Finance Minister Nirmala Sitharaman said on Saturday (February 1, 2024) that ₹10 lakh crore worth of assets would be monetised in the next five years as a second installment of the National Monetisation Plan.
“Regulatory and fiscal measures will be fine-tuned to support the plan,” Ms. Sitharaman said in her Budget speech in which she made other announcements to improve infrastructure development.
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Asset monetisation involves using existing public assets to encourage private investment. The related departments that own these often “idle” assets can be transferred to private investors for a limited period of time and a concession is given to the private entities that make use of the assets. The first proposal was made in 2021 and the target up to 2025 was ₹6 lakh crore.
In addition to asset monetisation, the Finance Minister mentioned plans to bring in capital expenditure through the Public Private Partnership (PPP), a method which had slowed down for a while. The Finance Ministry suggested that all Ministries related to infrastructure prepare project pipeline for the next three years. This is expected to shake up the slowing investments in the PPP route. States will also be expected to prepare proposals for projects funded by loans from India Infrastructure Project Development Fund (IIPDF).
The government will set up an Urban Challenge Fund with a budgetary allocation of ₹10,000 crore to implement “proposals for ‘Cities as Growth Hubs’, ‘Creative Redevelopment of Cities’ and ‘Water and Sanitation’ announced in the July Budget”, Ms. Sitharaman said in her speech. The fund will finance up to 25% of the cost of bankable projects with a stipulation that at least 50% of the cost is funded from bonds, bank loans and PPPs.
Moreover, Ms. Sitharaman assured to provide certainty regarding taxation of Alternate Investment Funds investing in infrastructure. Sovereign wealth funds and pension funds have also been given an extension of five more years to make an investment in infrastructure.
“Although the government’s capital expenditure allocation has increased moderately, the emphasis is likely to shift towards effective implementation through the Public-Private Partnership model. This is evident from initiatives aimed at creating a three-year pipeline of projects, annual monetisation plan, access to PM Gati Shakti Data ensuring a steady stream of investments and timely execution,” said Vishal Kotecha, director and head, infrastructure group, India Ratings & Research.
While some stakeholders are positive about the announcements to improve investment, experts, however, say that the potential of the announcements to yield results is too optimistic. “This (increase in private investment) would require some kind of crowding in for private investment, which unfortunately has not happened, despite the capex,” said Rohit Azad, an economist who teaches at the Jawaharlal Nehru University.
Published – February 02, 2025 12:17 am IST