The government should divest some of its viable operating brownfield assets – like ports and airports – as it could provide a low risk investment option to private sector, industry body CII has said.
“The government could put up for sale some of its viable operating brownfield assets, such as ports, airports, power plants, roads. Private investors get low risk project options to invest in,” CII said in a statement Sunday.
The chamber said low risk makes projects attractive to lenders as well and many international wealth funds and pension funds are also willing to bring in long term funds into India for such projects.
“Government capital, in turn gets freed up for fresh investments. The proceeds, however, should be earmarked for capital investments,” it said.
This brownfield asset recycling will be clearly a win-win proposition, it added.
Following brownfield assets recycling as an option for its divestment programme will help kick-start the private investment cycle.
“The model will help government raise resources for its infrastructure and capital expenditure programs, at a time when the fiscal headroom is constrained,” it noted.
The turmoil in the financial sector, slowdown in consumption and stalled infrastructure projects have made both lenders and investors risk averse.
“Still struggling to recover from the legacy NPAs, banks have been slow to resume corporate lending at levels achieved earlier. Investors, especially those in the infrastructure sector, have been hit hard by project delays because of regulatory approvals and issues related to land acquisition,” it added.
As a result, it said, the investment ratio (in current prices) has come down sharply from a healthy 39.6 per cent in FY12 to 31 per cent in FY19.
“It is important to bring back investor and lender confidence to get the private investment cycle going. Constraints on expansion of public investment due to fiscal compulsions makes it even more important and urgent to revive private investments. Brownfield asset recycling is a perfect low risk tool to achieve this,” it said.
Source: Business-Standard