The Indian government plans to accelerate the monetization of highway assets under the second phase of the National Monetisation Pipeline (NMP-II) from FY26 to FY30. The new phase aims to generate Rs 3.5 trillion by leasing out operational highways.
more than doubling the target of Rs 1.6 trillion. The funds will be used to reduce the National Highways Authority of India’s debt burden and sustain highway construction. The government plans to raise Rs 10 trillion across various infrastructure sectors under NMP-II. The pool of monetisable road assets is expanding rapidly, with an additional 8,000 km identified.
The Government of India is set to launch the second phase of the National Monetisation Pipeline (NMP-II), aiming to raise approximately ₹10 trillion over the next five years, concluding in FY30. This ambitious initiative seeks to unlock value from existing public infrastructure assets by attracting private sector investments, thereby generating revenue for further infrastructure development.
Highway Sector at the Forefront
The highway sector is anticipated to play a pivotal role in NMP-II, reflecting its significant contribution during the first phase. Previously, the road sector accounted for 27% of the total monetisation target, equivalent to ₹1.6 trillion out of ₹6 trillion.
In the upcoming phase, the National Highways Authority of India (NHAI) plans to monetise road projects valued between ₹150 billion to ₹200 billion through Infrastructure Investment Trusts (InvITs) within the fiscal year ending March 2025. This strategy aims to reduce NHAI’s substantial debt, which stood at ₹3.2 trillion as of August 2024.
Monetisation Strategies and Instruments.
- Infrastructure Investment Trusts (InvITs): These trusts enable direct investment from individual and institutional investors in infrastructure projects, offering a share of the income as returns. NHAI has previously utilised InvITs to monetise assets, raising about ₹160 billion by monetising 889 kilometers of toll roads.
- Toll-Operate-Transfer (TOT) Model: Under this model, investors make a lump-sum payment to the government in exchange for the right to operate and collect tolls from existing highway projects for a specified period. This approach has been instrumental in attracting private investment into the highway sector.
Achievements and Future Prospects
As of June 2024, the National Monetisation Pipeline has successfully monetised assets worth ₹3.85 lakh crore over three years, demonstrating the efficacy of the asset monetisation strategy. To achieve these objectives, the government is employing various monetisation models, including.
Building on this success, NMP-II aims to expand the scope of asset monetisation, with the highway sector expected to remain a key contributor. The government’s focus on monetising operational assets is designed to ensure that the proceeds are reinvested into new infrastructure projects, fostering economic growth and development.
Challenges and Considerations
While the asset monetisation program presents significant opportunities, it also faces challenges such as:
- Investor Appetite: Ensuring sustained interest from private investors requires transparent processes and attractive returns.
- Regulatory Framework: Establishing a robust regulatory environment is crucial to facilitate smooth transactions and protect stakeholder interests.
- Public Perception: Addressing concerns regarding the privatisation of public assets is essential to maintain public trust and support.
The launch of NMP-II underscores the Government of India’s commitment to leveraging private sector participation in infrastructure development. By focusing on the highway sector and employing innovative monetisation strategies.
Government aims to generate substantial revenue, reduce public debt, and accelerate the creation of new infrastructure assets, thereby contributing to the nation’s economic growth and development. India’s NHAI Plans $2.4 Billion Asset Monetisation in FY2024-25
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Construction, Infrastructure and Mining
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