National Monetization Pipeline: Union Minister for Finance and Corporate Affairs, Nirmala Sitharaman has unveiled the asset monetization pipeline of Central ministries and public sector entities: ‘National Monetization Pipeline (NMP)’.
- National Monetization Pipeline has been designed to attract more investors to the country and encourage alternative financing.
What is Monetization?
- Monetization is defined as the process of earning revenue from an asset business by converting the assets into cash or a form that is easily convertible into cash.
- Real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) are some of the structures that will be used to monetize assets in roads and power sectors.
What Is Asset Monetization?
- Asset Monetization means a limited period license/ lease of an asset, owned by the government or public authority, to a private sector entity for upfront or periodic consideration.
What is National Monetization Pipeline (NMP)?
- The National Monetization Pipeline (NMP) lists out assets and asset classes, under various infrastructure ministries, which will be monetized over a period of time. Which means assets will be monetized.
- The pipeline has been developed by NITI Aayog (National Institution of Transforming India), 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.
What Are The Assets Identified For Monetization?
- The NMP does not include monetization through disinvestment and non-core assets.
- Currently, it includes only the assets of central government ministries and CPSEs in infrastructure sectors.
- The sectors included are roads, ports, airports, railways, warehousing, gas & product pipeline, power generation and transmission, mining, telecom, stadium, hospitality and housing.
- The top 5 sectors capture about 83% of the aggregate pipeline value.
- These top 5 sectors include-
- Roads (27%)
- Railways (25%)
- Power (15%)
- Oil & gas pipelines (8%)
- Telecom (6%)
Assets in the NMP list:
Assets on the NMP list include-
- 26700 km of roads, railway stations, train operations & tracks
- 28608 CKT km of power transmission lines
- 6 GW of hydroelectric & solar power assets
- 86 lakh km fibre assets & 14,917 towers in the telecom sector
- 8154 km of natural gas pipelines
- 3930 km of petroleum product pipelines.
- The pipeline has been prepared based on inputs and consultations from respective line ministries and departments, along with the assessment of the total asset base available therein.
- Monetization through disinvestment and monetization of non-core assets have not been included in the NMP.
- Further, at present, only assets of central government line ministries and CPSEs in infrastructure sectors have been included.
- The process of coordination and collation of asset pipeline from states is currently ongoing and the same is envisaged to be included in due course.
- The framework for monetization of core asset monetization has three key imperatives.
- Monetization of Rights Not ownership, Assets handed back at the end of transaction life.
- Brownfield de-risked assets, stable revenue streams.
- Structured partnerships under defined contractual frameworks with strict KPIs and performance standards.
- 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, which can thereafter be leveraged for further public investments,
- The NMP comprises a four-year pipeline of the Central Government’s Brownfield infrastructure assets.
Significance of the monetization:
- Monetization seeks to help in creating further value for infrastructure creation in India and exploring innovative ways of private participation without transferring government ownership.
- The National Monetization Pipeline book will be released in the presence of Vice Chairman of NITI Aayog, Dr. Rajiv Kumar, CEO, Shri Amitabh Kant, and Secretaries of relevant line ministries whose assets constitute the monetization pipeline.
Key challenges of the scheme:
Major key challenges in the NMP roadmap include:
- Lack of identifiable revenue streams across various assets,
- Level of capacity utilization across gas and petroleum pipeline networks,
- Dispute resolution mechanism,
- Regulated tariffs in power sector assets, and
- Low interest among investors for national highways below four lanes.
- The Union Budget 2021-22 identified and laid a lot of emphasis on Asset Monetization as a means to raise innovative and alternative financing for infrastructure, and included a number of key announcements.
- The Finance Minister had made a lot of significant announcements regarding asset monetization and stressed the fact that the government is looking at innovative ways to raise finances.