Industrial Sector Updates – Industrial Policy, Ease of Doing Business, etc.

National Monetization Pipeline

Note4Students

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.

Framework

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.

Estimated Potential

  • 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.

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