Railway asset monetisation through Rs 18,000 cr InvIT unlikely in FY23

The Centre may be pushing hard to meet the asset monetisation target, but the monetisation of Indian Railways assets through an Infrastructure Investment Trust (InvIT), estimated at Rs 18,000 crore, is unlikely to succeed this fiscal year, Business Standard has learnt.

Being the second-highest contributor (26 per cent) to the Rs 6-trillion asset monetisation pipeline, a shortfall on the part of the railways could put a significant dent on the Centre's overall target. "Making an InvIT is a long-drawn process. It has to be finalised with a careful valuation of assets, which the market will be receptive to. Approvals will have to be taken from regulators, such as the Securities and Exchange Board of India (Sebi), and the plan would have to be sanctioned by stakeholder ministries and empowered committees, whose feedback will have to be accommodated. Between all that, it is likely to take significant time," said an official aware of the matter.

The ministry has received an interim report on the way forward for public-private partnership by its advisory consultancy firm. The options, including InvIT, in the report, will be discussed with the the railway board chairman and top officials and a plan is likely to be made after the final report is submitted.

 

"We currently have an abstract structure for InvITs, based on which there is an evaluation underway. This will be formulated into a plan with clear monetary targets and asset structures, which are being internally deliberated as of now," said the official.

All InvIT proposals have to be cleared by the Public-Private Partnership Appraisal Committee (PPPAC), headed by the finance ministry's Department of Economic Affairs. The last PPPAC meeting took place in December.

According to private-sector sources in the know, a recurring issue with a railways InvIT has been its reluctance to part with operational control of the assets. In August, PPPAC rejected a GAIL India proposal to monetise gas pipelines, as it wanted to keep operational control of the assets. The report sent to the Railways has tried to accommodate the specific needs of railways regarding operational technicalities, while adhering to the requirements of the PPPAC.

Business Standard earlier reported that after the initial success of InvITs by the National Highways Authority of India (NHAI) and PowerGrid, the government wants to fast-track InvITs for railways, port assets, and gas pipelines.

The Centre sees distinct benefits in monetising through this instrument. "The structure enables Indian Railways to tap domestic and foreign long-term capital at a competitive cost of funds. Divestment of units of the InVIT provides upfront capital proceeds to the railways as the sponsor, O&M expenses as sub-contracting revenue, and dividend income on the residual equity holding in InvIT," said NITI Aayog in its national monetisation pipeline report.

According to the report, the railways have to monetise Rs 57,222 crore of assets this fiscal year a majority of which would come through track signalling and overhead equipment InvIT (Rs 18,700 crore), redeveloped railway stations (Rs 29,305 crore), and passenger train operations (Rs 7,002 crore). Several ministries have also got revised targets from the Centre in view of their monetisation performance in 2021-22.

Meanwhile, there is still a significant push to get the monetisation pipeline rolling through other instruments, especially in view of the national transporters� failure to monetise assets in the last fiscal year. Both the finance ministry and Union Cabinet have recently come down heavily on railways and asked it to expedite its monetisation efforts.

The Target

Rs 57,222 cr: Asset monetisation target for Railways in FY23

Rs 18,700 cr: Track signalling and overhead equipment

Rs 29,305 cr: Redeveloped railway stations

Rs 7,002 cr: Passenger train operations