Holdco for infra assets divides policymakers
Policymakers within the NITI Aayog and government departments are divided over the creation of a special entity (or holding company) to park infrastructure assets for monetisation.
Policymakers within the NITI Aayog and government departments are divided over the creation of a special entity (or holding company) to park infrastructure assets for monetisation.
This is even as the policy think tank has asked the National Highways Authority of India (NHAI) to create such a special purpose vehicle (SPV) to park its assets. This has been done to keep a pipeline of assets ready for monetisation, according to two government officials.
A similar proposal is being considered for other infrastructure assets with other government departments.
The NHAI has been asked to explore if revenue rights can be tweaked for an entity or SPV, and whether a timebound asset monetisation framework can be readied. However, those with differing views say moving assets or revenue rights to a single SPV will not be the “most optimal structure”.
Creating a single SPV or holding company for infrastructure core assets needs to be assessed from a regulatory point of view, said one of the two officials quoted above. Many of these infrastructure assets are housed in balance sheets and may have associated liabilities, he added. Therefore, infrastructure needs sector-specific expertise for day-to-day management of assets.
This comes at a time when the government has set itself a target of ~2.5 trillion in monetisation of close to 100 assets of central ministries and PSUS — spread across 30 asset classes — and is also looking to roll out its National Monetisation Pipeline.
The Ministry of Road, Transport and Highways, the nodal ministry for NHAI, has been given a target of ~30,000 crore. The NHAI, too, has raised concerns over moving regulated assets into a holding company structure, said the first official cited above.
At present, the projects offered on a toll-operate-transfer (TOT) basis are those that are already generating revenues from toll collection, and cannot be suo moto parked under a holding company, the second official said.
Besides, the projects selected for infrastructure investment trusts (Invits) are transferred to an asset management company, which carries the INVIT process forward.
The road ministry has said that there will be no distinction between the TOT or INVIT projects, as far as pipeline creation for the monetisation drive is concerned.
A senior official had earlier said: “There is very little difference in the government’s eyes, and will be driven purely by demand.”
The NHAI is yet to come out with an INVIT, which essentially works like a mutual fund, enabling direct investment of small amounts of money from possible individual or institutional investors in infrastructure, so as to earn a small portion of the income in return.
In such a model, assets are placed in an INVIT where investors put in money, and income generated from such assets is paid as dividend. Under the TOT model, the NHAI has so far come out with three tranches for road monetisation. The first bundle of nine projects awarded in 2018, totaling 681 km of highways in Andhra Pradesh and Gujarat, has been a hit.
Overall, the NHAI has identified 19 projects worth ~35,000 crore for fund-raising under this route.