National Monetisation Pipeline (NMP)

• The pipeline has been developed by NITI Aayog, in consultation with infrastructure line ministries, based on the mandate for ‘Asset Monetisation’ under Union Budget 2021-22.
• NMP estimates aggregate monetisation 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.
• Framework of NMP:
• The pipeline has been prepared based on inputs and consultations from respective line ministries and departments, along with the assessment of total asset base available therein.
• Monetization through disinvestment and monetization of non-core assets have not been included in the NMP.
• The framework for monetisation of core asset monetisation has three key imperatives:
• Monetization of rights and not the ownership, assets headed 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.

Monetization in NMP

    In a monetization deal, the government essentially transfers revenue rights to third parties for a predetermined transaction period in exchange for an upfront payment, a revenue share, and an agreement to invest in the assets.

• The main forms utilized to monetize assets in the road and electricity sectors include real estate investment trusts (REITs) and infrastructure in one investment trusts (InvITs).
• Additionally, because they are registered on stock exchanges, investors can access liquidity via secondary markets.
• While these are organized financing mechanisms, alternative Public Private Partnership (PPP) -based monetization methods include:
• Operate maintain transfer (OMT)
• Toll operate transfer (TOT)
• Operations, maintenance, and development (OMD)

Sector specific data and associated challenges

Telecom:

• As against the target of Rs 20,180 crore, the department of telecom has not been able to monetise any of telecom assets so far and doubts have emerged if it could achieve anything.
• The original plan was to mobilise Rs 15,780 crore by inviting private investors to bid for Bharat Broadband Network’s 300,000 km of optical fibre networks to upgrade, operate and maintain across the country, including states.
• Another Rs 4,400 crore was estimated from BSNL/MTNL tower monetisation through rent-operate-transfer (ROT) concession model, but bids are yet to be called for these.

Mining sector:

• Previous year, a sum of about Rs 1 trillion was raised through the monetisation route as against the target of Rs 88,200 crore due to the mining sector.

Natural gas and petroleum product pipelines:

• Monetisation of natural gas and petroleum product pipelines were projected to fetch Rs 9,176 crore in FY23.
• However, oil and gas companies have proposed alternate assets such as monetisation of oil fields (on the lines of mines monetisation) through private participation in exploration and with the inflow of technology.

Road Transport and Highways:

• Monetisation by other sectors including road assets by the National Highways Authority of India (NHAI) are on track.
• NHAI is expected to meet its target of Rs 32,855 crore from the securitisation of toll receivables from expressways, Infrastructure Investment Trusts (InvITs) and Transfer-Operate-Transfer (ToT) models.

Railways:

• Railways is the biggest component of the Rs 6 trillion NMP in the four years through FY25.
• Railways collected just Rs 800 crore via monetisation through redevelopment of one railway station and some railway colonies in the last fiscal year as against the target of Rs 17,810 crore.
• According to the NMP, railways need to monetise 120 stations, 30 trains and 1,400 km track, among others in FY23.

Significance of NMP

• Innovative way of Private Participation:
• Private sector is well known for its efficiency and technology.
• NMP will provide a way to exploit the strength of the Private sector for infrastructure creation without transfer of ownership.
• Ensure Further investment in Infrastructure Building:
• It will help to properly monetise underutilised brownfield projects
• Revival of the economy and create sustainable demand.
• Spillover effect of infrastructure is high on cycle of demand
• It will create further value for infrastructure creation in the country
• It will enable high economic growth and seamlessly integrating the rural and semi-urban areas for overall public welfare.

Challenges associated with NMP

• Level of capacity utilisation in gas and petroleum pipeline networks.
• Lack of identifiable revenue streams in various assets.
• Absence of Dispute resolution mechanism.
• Analysts also point to issues such as the lack of independent sectoral regulators as potential impediments.

Looking Forward

Thus, the Asset Monetisation 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.

Therefore, New models like Infrastructure Investment Trusts  and 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.