From UPSC perspective, the following things are important :
Prelims level : Asset Monetization
Mains level : National Monetization Pipeline (NMP)
The Union Finance Minister has launched the National Monetization Pipeline for the brownfield infrastructure assets.
What is Asset Monetization?
- Asset Monetization involves the creation of new sources of revenue by unlocking of the value of hitherto unutilized or underutilized public assets.
- Internationally, it is recognized that public assets are a significant resource for all economies.
- Many public sector assets are sub-optimally utilized and could be appropriately monetized to create greater financial leverage and value for the companies and of the equity that the government has invested in them.
- This helps in the accurate estimation of public assets which would help in the better financial management of government/public resources over time.
National Monetization Pipeline (NMP)
- The NMP comprises a four-year pipeline of the Central Government’s brownfield infrastructure assets.
- It will serve as a medium-term roadmap for the Asset Monetization initiative of the government, apart from providing visibility for the investors.
- Incidentally, the 2021-22 Union Budget, laid a lot of emphasis on Asset Monetization as a means to raise innovative and alternative financing for infrastructure.
- It has to be noted that the government views asset monetization as a strategy for the augmentation and maintenance of infrastructure, and not just a funding mechanism.
What is the plan?
- NMP is envisaged to serve as a medium-term roadmap for identifying potential monetization-ready projects, across various infrastructure sectors.
- It 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.
Objectives of the program
- 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.
The framework for core asset monetization has three key imperatives:
- 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.
- Further, currently, only assets of central government line ministries and CPSEs in infrastructure sectors have been included.
- 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 aggregate asset pipeline under NMP over the four-year period, FY 2022-2025, is indicatively valued at Rs 6.0 lakh crore.
- The estimated value corresponds to ~14% of the proposed outlay for Centre under NIP (Rs 43 lakh crore). This includes more than 12-line ministries and more than 20 asset classes.
- 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 (by estimated value) capture ~83% of the aggregate pipeline value. These top 5 sectors include: Roads (27%) followed by Railways (25%), Power (15%), oil & gas pipelines (8%) and Telecom (6%).
Implementation & Monitoring Mechanism
- As an overall strategy, significant share of the asset base will remain with the government.
- The programme is envisaged to be supported through necessary policy and regulatory interventions by the Government in order to ensure an efficient and effective process of asset monetisation.
- These will include streamlining operational modalities, encouraging investor participation and facilitating commercial efficiency, among others.
- Real time monitoring will be undertaken through the a separate dashboard.