State-run NHPC Ltd, India’s largest hydro power producer, plans to leverage infrastructure investment trusts or InvITs to monetize 10 of its 22 projects, according to three people aware of the development.
The move is in line with stepped up efforts of state-run public sector units (PSUs) to generate resources for India’s ambitious infrastructure plans, which include tapping the InvIT route.
InvITs are trusts that manage income-generating infrastructure assets, typically offering investors regular yield and a liquid method of investing in infrastructure projects.
Union finance minister Nirmala Sitharaman had in her maiden budget increased the divestment target from ₹90,000 crore to ₹1.05 trillion for the current fiscal year, focusing on consolidation of PSUs and strategic disinvestment. The disinvestment proceeds will help the Centre invest ₹100 trillion over the next five years to boost India’s infrastructure.
NHPC will soon hire a consultant to assess the feasibility of asset monetization of a few hydro power projects through the limited tender route, one of the three, a government official, said on condition of anonymity.
The consultant will also provide “a cost-benefit analysis of adopting different options of the asset monetization schemes and its merits and demerits in the context of NHPC Ltd".
NHPC posted a net profit of ₹2,631 crore on a revenue of ₹8,161 crore in 2018-19.
The government of India owns 73.33% equity in the Mini Ratna PSU that has an asset base of ₹59,609 crore. NHPC has a power generation capacity of 7,071 MW through its 22 operational hydro projects and two wind and solar projects. It also has four hydro projects totalling 4,424 MW under construction and 10 projects totalling 7,321 MW awaiting clearance.
The other central hydro sector PSUs are Tehri Hydro Development Corp. Ltd, North Eastern Electric Power Corp. Ltd (Neepco), and SJVN Ltd. At present, India has an installed power-generation capacity of 357,875 megawatts (MW), of which around 13% or 45,399.22 MW is generated through hydroelectric power projects.
In 2014, a concept paper on the possibility of a merger of all state-owned hydroelectric companies recommended a phased approach, starting with Neepco combining with NHPC, followed by THDC India Ltd and SJVN Ltd.
“The process for raising resources by NHPC has started," said a second government official requesting anonymity.
Queries emailed to spokespersons of the ministries of power, finance, and NHPC on Friday evening remained unanswered.
The National Highways Authority of India also aims to raise more than ₹85,000 crore by fiscal year 2025 through InvITs and the toll-operate-transfer model. The National Democratic Alliance government at the Centre has set a target to achieve a $5-trillion economy by 2024-25. Spending on infrastructure is imperative to bring India back to a high growth trajectory. However, the economy grew at its slowest pace in six years at 5% in April-June amid sluggish demand, slowdown in the automobile sector and lack of private investment.
Tax revenue growth has been tepid and the Centre has thus relied more on non-tax revenues, including divestment, to reduce the fiscal deficit to 3.3% of gross domestic product (GDP) in 2019-20.
Between 2008 and 2017, the government spent $1.1 trillion on infrastructure. In his Independence Day speech, Prime Minister Narendra Modi had said ₹100 trillion will be spent towards creating infrastructure in the country.