Air India fiasco to Macquarie-NHAI pact: A tale of two privatisations

For privatisation to pick up momentum, it is essential to start with "less complex" assets

 

Charles Dickens' famous line "It was the best of times, it was the worst of times" in his novel "A Tale of Two Cities" aptly describes the recent privatisation scenario in India.

While the bid from Macquarie to acquire a bundle of nine highways from the National Highways Authority of India (NHAI) exceeded NHAI's expectations by 50 percent, the Air India privatisation effort, in sharp contrast, failed to attract even a single bidder. Both experiences, with varying degrees of complexity, teach us valuable lessons.

Investors with capital to allocate are looking at assets in India -- one of the fastest-growing economies in the world -- with an eye on the growth in the coming decades. It is important to realise that investors, in general, are primarily looking for assets with similar qualities to what the bundle of highways offered, namely (1) Cash-flow profile clarity (2) Positive cash-flow asset (3) Consumption growth story to back the asset (4) Total management control.

It is essential first to understand the nature of investors who would be interested in a privatisation or asset monetisation in India. There are primarily four types of investors that we must look at (1) Indian corporations (2) Foreign institutional investors such as pension, sovereign and insurance funds (3) Private equity firms (4) Trade buyers.

Of these, the Indian corporates will have quite a few significant players with strategic interests in the privatisation, but by and large, given their stressed balance sheets, their involvement will be limited. If anything, cash-flow clarity will be an absolute essential for them to invest in privatisation.

Large pension, sovereign and insurance funds that have started to invest in Indian assets especially over the last few years would be interested in the asset monetisation process. Such funds look for infrastructure assets with positive cash-flow profiles. Because, in general, they have long-dated liabilities, they focus on assets that can utilise long-dated debt financing to yield stable positive cash-flows. Clarity around cash-flow profiles and positive cash-flow assets will generally be the investments such funds find attractive.

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Soon, you may have to pay highway toll based on distance actually travelled

Geo-fencing to map vehicle route; pilot run expected on Delhi-Mumbai highway

 

 

Each time a vehicle pays toll on a national highway, its movement may now be mapped for the distance it travels on that road. This will be done to charge toll in proportion to the road used by that vehicle.

A pilot run for such ‘geo-fencing’ on the Delhi-Mumbai highway is expected to begin in the next couple of weeks after the Ministry of Road Transport and Highways and the National Highways Authority of India (NHAI) finalise theproposal of charging toll based on the distance travelled.Geo-fencing uses global positioning system or radio frequency identification (RFID) technologies to create a virtual geographic boundary, which would enable the software to trigger a response when a mobile device enters or leaves a particular area.“The pilot run on the Delhi-Mumbai highway will begin in the next two to three weeks for the geo-fencing to gauge the entry and exit of vehicles,” an official said.

A toll plaza might be placed at all entry and exit points to ensure the commuter pays only for the distance travelled.

Putting location to work Geo-fencing uses global positioning system or radio frequency identification (RFID) technologies to create a virtual geographic boundary It enables the software to trigger a response when a mobile device enters or leaves a particular area Pilot run on the Delhi-Mumbai highway will begin in the next two to three weeks for the geo-fencing to gauge the entry and exit of vehiclesFASTags use RFID technology to enable vehicles to pass through toll plazas According to the National Highways Fee (Determination of Rates and Collection) Rules, 2008, the fees are to be revised every year with effect from April 1. According to the current policy, for six-lane projects, toll is levied even before the completion of highways, if four lanes have already been constructed.

According to a source in the know, the proposal requires making amendments to the existing policy and might need Cabinet approval. The necessary changes are currently being deliberated by the road ministry and the NHAI.The geo-fencing initiative is in line with the government’s move to have FASTags for seamless commute on national highways. The move, which was aimed at ending congestion at toll plazas besides ensuring leakage-proof toll revenue collection, was introduced in September 2017.

FASTags are affixed on the windshields of vehicles and use RFID technology to enable vehicles to pass through toll plazas, through designated lanes, without waiting in queues as the payment is made electronically.The necessary changes are currently being deliberated by the road ministry and the NHAI. The geo-fencing initiative is in line with the government’s move to have FASTags for seamless commute on national highways. The move, which was aimed at ending congestion at toll plazas besides ensuring leakage-proof toll revenue collection, was introduced in September 2017.FASTags are affixed on the windshields of vehicles and use RFID technology to enable vehicles to pass through toll plazas, through designated lanes, without waiting in queues as the payment is made electronically.

ARTICLE SOURCE- BUSINESS STANDARD.