NATIONAL
MONETISATION PIPELINE - ECONOMY
News: The coal Ministry leads the National Monetization Pipeline
What's
in the news?
●
₹. 33422 crores of assets, the Government
has monetized under the National Monetization Pipeline in 2022-23 so far, with
the coal Ministry leading the list by raising 17,000 crore.
● There is likely to be a shortfall of 38,243 crore in the overall asset monetization target of 1,62,422 crore in 2022-23.
National
monetization pipeline:
●
The pipeline has been developed by NITI Aayog, in consultation with infrastructure line
ministries, based on the mandate for
‘Asset Monetization’ under Union Budget 2021-22.
●
NMP estimates aggregate monetization potential of Rs 6.0 lakh crores through
core assets of the Central Government, over a four-year period, from FY 2022 to FY 2025.
● It aims to unlock value in brownfield projects by engaging the private sector, transferring to them revenue rights and not ownership in the projects, and using the funds generated for infrastructure creation across the country.
Greenfield Project: It refers to investment in a manufacturing, office, or other physical company-related structure or group of structures in an area where no previous facilities exist.
Brownfield investment: The projects which are modified or upgraded are called brownfield projects. The term is used for purchasing or leasing existing production facilities to launch a new production activity.
●
The NMP has been announced to provide a
clear framework for monetization and give potential investors a ready list of
assets to generate investment interest.
●
Currently, only assets of central government line ministries and Central
Public Sector Enterprises (CPSEs) in infrastructure sectors have been included.
●
The Government has stressed that these are
brownfield assets, which have been
“de-risked” from execution risks, and therefore should encourage private
investment.
●
Roads,
railways and power sector assets will comprise over 66% of the total estimated
value of the assets to be monetised, with the remaining
upcoming sectors including telecom, mining, aviation, ports, natural gas and
petroleum product pipelines, warehouses and stadiums.
●
In terms of annual phasing by value, 15%
of assets with an indicative value of Rs 0.88 lakh crore are envisaged for
rollout in the current financial year.
●
The NMP
will run co-terminus with the Rs 100 lakh crore National Infrastructure
Pipeline (NIP)
● Monetization through disinvestment and monetization of non-core assets have not been included in the NMP
The framework for monetization of core asset monetization has three key imperatives.
Objectives:
●
NMP aims for universal access to high-quality and affordable infrastructure to the
common citizen of India.
●
Asset monetization, based on the
philosophy of Creation through Monetization, is aimed at tapping private sector
investment for new infrastructure creation.
●
This is necessary for creating employment
opportunities, thereby enabling high economic growth and seamlessly integrating
the rural and semi-urban areas for overall public welfare.
● The strategic objective of the programme is to unlock the value of investments in brownfield public sector assets by tapping institutional and long-term patient capital.
Expected
Benefits of the Scheme:
1. Innovative way of Private Participation: Private sector is well known for its efficiency and technology.
2. NMP will provide a way
to exploit the strength of the private sector for infrastructure creation without transfer of ownership.
3. Ensure Further investment in Infrastructure Building: It will help
to properly monetize underutilized brownfield projects
4. Revival of the economy and create sustainable demand.
5. Spillover effect of infrastructure is high on cycle of demand e.g.
infrastructure related raw materials requirements (cement, steel..etc.) will
boost
6. Monetization will make the hitherto unproductive assets as
productive in nature.
7. It will reduce the cost of maintenance of the
assets at the same time continued revenue flow from the assets without losing
government ownership.
8. It will improve the current fiscal capacity of the government and help to reinvest in other infrastructure development.
Challenges:
●
Lack
of identifiable value streams in various assets may
discourage the private sector.
●
Since ownership
is not transferred, infrastructure projects may not be attractive for the
private sector.
●
Lack
of dispute resolution mechanism will lead to loss of
time and resources in case of conflict.
●
Risk of creation of monopolies where a few firms capture most of the
assets.
●
The issue
of balancing social benefit and private profit.
●
Lack
of independent regulator will hamper smooth functioning.
●
Government red tape and complex procedures may slow down the process.
● Sector specific challenges like regulated power tariffs, low-capacity utilization in gas and oil pipelines, low investor interest in national highways less than four lanes will create difficulty in their monetization.
WAY
FORWARD:
●
Asset Monetization needs to be viewed not
just as a funding mechanism, but as an overall
paradigm shift in infrastructure operations, augmentation and maintenance
considering the private sector’s resource efficiencies and its ability to
dynamically adapt to the evolving global and economic reality.
●
New models like Infrastructure Investment Trusts & Real Estate Investment Trusts will enable not just financial
and strategic investors but also common people to participate in this asset
class thereby opening new avenues for investment.