The government of India had launched the National Monetisation Pipeline (NMP) in August 2021. Read here to know more about NMP.
Government of India needs revenue to fund various initiatives. From where does the revenue come from? Can there be new sources other than tax revenue?
Yes, there are certain assets of Indian Government which can be montized. For example, Public Sector Enterprises like LIC.
The National Monetisation Pipeline (NMP) estimates an aggregate monetization potential of Rs 6 lakh crores through core assets of the Central Government, over a period of four years from FY 2022 to FY 2025.
What is National Monetisation Pipeline (NMP)?
NITI Aayog has developed the pipeline, in consultation with infrastructure line ministries, based on the mandate for ‘Asset Monetisation’ under Union Budget 2021-22.
It aims to unlock value in brownfield projects by engaging the private sector.
The revenue rights will be transferred to them but not ownership in the projects. The funds generated will be used for infrastructure creation across the country.
NMP as a part of Divestment Policy
The plan is in line with Prime Minister’s strategic divestment policy, under which the government will retain a presence in only a few identified areas with the rest tapping the private sector.
The National Monetisation Pipeline is announced to provide a clear framework for monetisation and give potential investors a ready list of assets to generate investor interest.
Union Budget 2021-22 has identified the monetisation of operating public infrastructure assets as a key means for sustainable infrastructure financing.
As of now, only assets of central government ministries and Central Public sector enterprises (CPSEs) in infrastructure sectors have been included.
Roads, railways, and power sector assets will comprise over 66% of the total estimated value of the assets to be monetized.
The sectors including telecom, mining, aviation, ports, natural gas, and petroleum product pipelines, warehouses, and stadiums will cover the remaining 44% estimated value.
NMP vs NIP
The NMP will complement the Rs 100 lakh crore National Infrastructure pipeline (NIP) announced in December 2019.
- NIP will uplift the infrastructure projects by creating jobs, improving ease of living, and providing equitable access to infrastructure for all, making growth more inclusive.
- NIP includes economic and social infrastructure projects.
Note: The Gati Shakti scheme will subsume the National Infrastructure Pipeline that was launched in 2019.
What is Monetisation?
In a monetisation transaction, the government is basically transferring revenue rights to private parties for a specified transaction period in return for upfront money, a revenue share, and commitment of investments in the assets.
Real estate investment trusts (REITs) and Infrastructure investment trusts (Invits), for instance, are the key structures used to monetize assets in the roads and power sectors.
These are also listed on stock exchanges, providing investors liquidity through secondary markets as well.
While these are structured financing vehicles, other monetisation models on Public-Private Partnership (PPP) basis include:
- Operate Maintain Transfer (OMT)
- Toll Operate Transfer (TOT)
- Operations, Maintenance & Development (OMD)
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 Project:
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.
Challenges for implementing National Monetisation Pipeline
- Deficiency of identified revenue-generating ways in various assets, hence investment in them may end up in losses.
- The slow pace of privatization in government companies including Air India and BPCL.
- The recently launched PPP initiative in railways indicates a lack of private investors’ interest.
- Capacity utilization in gas and petroleum pipeline networks is not up to the mark and has a lot of untapped potentials.
- Power sector assets come with regulated tariffs making them less viable for private players.
- National highways below four lanes do not attract investors.
- Many assets like railways have multiple stakeholders, including state governments, which own a stake in the entity.
Way Forward
The National Monetisation Pipeline framework on paper looks very promising, but the government should ensure proper execution to derive desired outcomes.
There is a need for an efficient dispute resolution mechanism, which is one of the key aspects of such a wide-ranged plan.
The success of the infrastructure expansion plan would depend on other stakeholders playing their due role; hence all the strata should be duly considered and be given opportunities.
The State governments and their public sector enterprises and the private sectors should be able to work together through healthy competition.
A high-Powered Intergovernmental Group can be set up as recommended in the 15th finance commission to re-examine the fiscal responsibility legislation of the Centre and States.
Krishna mohan says
Let’s oppose the National Monetisation Pipeline.
The Central government has unveiled a four-year National (Asset) Monetisation Pipeline (NMP) aiming to garner Rs 6 lakh crore. The NMP is aimed at handing over huge functional infrastructural assets of the country to private corporate companies and big business houses, including foreign MNCs. The corporate cronies of the government will be allowed to mint huge money utilising the assets built with people’s money and labour. In the same line many NDA led state governments have also started the exercise of gifting the state owned assets and land to private corporate.
Privatisation at any cost and by any means has become the hallmark of this government. It is now seeking to hand over the huge state-owned infrastructural assets for upfront payment for future expected income. That is the sinister design of this so called NMP, which is going to handover the right of operating these huge infrastructural assets for a period of 30-35 years to the monopolies. This would adversely impact the entire economy availing these infrastructural services. It will result in further worsening of the already alarming situation of job losses and unemployment.
Infrastructural assets identified for monetisation include 400 railway stations, 90 passenger trains, 1400 km railway track, 741 km Konkan Railway, 15 railway stadiums and selected railway colonies, 265 railway goods sheds and 4 hill railways –all for a mere Rs 1.5 lakh crore; 25 Airports fully modernised with huge investment out of the public exchequer for only Rs 20,782 crore; 160 coal mining assets with huge coal reserves—for only Rs 28,747 crore; 3930 km long petroleum pipe line—for a paltry Rs 22503 crore; 31 projects in 9 major ports with huge network of navigable waterways –all for Rs 12,828 crore; Warehouses of Food Corporation of India and Central Warehousing Corporation of total storage capacity of 210 lakh MT –for only Rs 28,900 crore—these are few more examples of day-light robbery of the national exchequer in the name of “Asset Monetisation”.
Also 28,608 circuit kilometres electricity grid under Power Grid Corporation of India and around 30,000 kilometres of highways are also being handed over to private corporate for long-term with monopoly operational rights. Along with the NMP, government has now come out with a land monetisation programme and a public sector company titled ‘National Land Monetisation Corporation’ has been set up to facilitate selling away huge land assets of PSUs, railways, defence sector, BSNL, etc., for a pittance. And this is not all – the NMP project envisages further flow of more infrastructural assets through that pipeline to private corporates giving them long-term monopoly rights.
The present regime with its historical opposition to the public sector and to self-reliant development of the national economy based upon it, is resorting to privatisation of the entire public sector covering infrastructure, industries and public utility services, by any means and at very low prices. It is completely unconcerned about the destructive impact of these measures on the national economy and our people. In the thirty-odd years of neoliberal policy regimes, the present regime account for the overwhelming share of disinvestment of public sector enterprises.
Decisive and determined struggles against the loot and handing over of people’s assets to big business, domestic and foreign, in the name of “monetisation” of assets should be developed.
The Union government claims that the NMP involves only a lease of assets, not their sale. This is a patently misleading claim. The big business entities that make use of the assets leased to them will, through fleecing their customers and other means, make huge gains worth several times the paltry lease amounts they pay to the government.
There is no guarantee that the assets will be returned to/taken back by the government at the end of the lease period in the same conditions as at the time of lease. The entire exercise begs the simple question of why the assets cannot be operated by the government to benefit the people.
Let’s oppose the Union government’s anti-national and anti-people project of “National Asset Monetisation Pipeline”. This anti-national design of loot on national assets shall not pass.