National Monetization Pipeline (NMP)

Launched Date: 23 -AUG-2021

Launched by: Nirmala Sitharaman ( Union Minister for Finance and corporate affairs)

Central Government has Announced the Asset Monetization plan to raise the fund of Rs 6 Lakh Crore ($81 Billion) through monetizing the Central Government Core Assets, over the next 4 years until FY2025 under the National Monetization Pipeline (NMP) program.

National Monetization Pipeline (NMP) Program Launched by Union Minister for Finance and Corporate affairs Smt. Nirmala Sitharaman. It is Launched as Asset monetization Pipeline of Central Ministries and Public Sector Entities: “National Monetization Pipeline (NMP Volume 1 &2).

The Asset Monetization term was introduced in UNION BUDGET 2021-22 by Finance Minister Nirmala Sitharaman. Based on the mandate of Asset Monetization, the National Monetization Pipeline (NMP) report has been developed and Created by NITI Aayog, In consultation with Infrastructure line ministries.

The National Monetization Pipeline (NMP) Program comprises a 4-year pipeline for Asset Monetization of the Central Government Brownfield Assets and this will not include Land Assets of the government.

The NMP includes the recent “ Scheme of Financial Assistance to States for Capital Expenditure”, which incentivizes State Government to recycle State Government-Owned assets for fast-tracking Greenfield Infrastructure.

Smt. Sitharaman also said that the Asset monetized under the MNP will remain under the ownership of the Central Government. Besides these assets will be mandatorily handed back to the Center after a Stipulated period of time.

  • Brownfield Assets :

    Brownfield is a term used in urban planning, Which means Land or Asset that has been used previously but is lying vacant or unused now. Brownfield asset is also a developed asset but that may still require capital expenditure and expansion. For example, Chemical Factories, Abandoned Oil refineries, Heavy manufacturing Units which are not in use, are some examples of brownfield sites.

  • Greenfield Assets :

    A Greenfield Asset is one where the land on which the project is developed, has never been used and there is no need to rebuild or demolish an existing structure. Greenfield assets are vacant land and still require development.

  • What is Asset Monetization?

    Asset Monetization is based on the philosophy of Creation Through Monetization. Asset monetization is to enlarge or spread to create new sources of revenue by unlocking the utilized and underutilized public sector assets for private investment or tapping the private sector to invest in utilized and underutilized public sector assets.

    This concept will also help to create new employment opportunities and it also helps to enable high economic growth and develop the integration for the rural and semi-urban areas for overall public welfare.

Framework for Core-Asset Monetization :

Framework for asset monetization

  • Selection of de-risked and brownfield assets with stable revenue generation profile or long-term revenue rights.
  • The transaction should be structured around revenue rights as against transfer of full ownership. Towards this, hand back of assets to the original asset owner at the end of contract life is a key requirement.
  • Monetization should be viewed as structured contractual partnerships and not privatization or slump sale of assets.
  • Selection of private partner should be through a transparent mechanism and the utilization of proceeds received should be towards well-defined uses such as new infrastructure creation etc.
Sector-Wise Estimated Potential :

Considering that infrastructure creation is totally linked to monetization. The aggregate asset pipeline under NMP of Rs. 6.0  lakh crore over the 4 years period FY 2022-2025 is an indicative value.  This Estimated value corresponds to 14 % of the proposed expenditures for the Center 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%).

Sector-wise Monetization Pipeline over FY 2022 – 2025 :

Sector-Wise Asset Monetization Over FY 2022-2025

 

Indicative monetization pipeline value year-wise

List of Infrastructure asset base under key Central govt. public entities :

List-of-Infrastructure-asset-base-under-key-Central-govt.-public-entities

Implementation and Monitoring Mechanism:

As an overall strategy, a significant share of the asset base will remain with the government.

The NMP program is monitored through necessary policy and regulatory interventions by the Government in order to ensure an efficient and effective process of asset monetization.

These will include streamlining operational modalities, encouraging investor participation, and facilitating commercial efficiency, among others.

Real-time monitoring will be undertaken through the asset monetization dashboard, as envisaged under Union Budget 2021-22, to be rolled out shortly.

 

Conclusion:

The end objective of this initiative is to enable ‘Infrastructure Creation through Monetization’ wherein the public and private sector collaborate, each excelling in their core areas of competence, so as to deliver socio-economic growth and quality of life to the country’s citizens.

 

“The Asset Monetization program has taken shape because of the vision of our Hon’ble Prime Minister who has always believed in 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.

                                                         Smt. Nirmala Sitharaman, Union Minister

                                                                           (Finance & corporate Affaires)

“The NMP is aimed at creating a systematic and transparent mechanism for public authorities to monitor the performance of the initiative and for investors to plan their future activities. Asset Monetization 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. New models like Infrastructure Investment Trusts  & 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. I hence consider the NMP document to be a critical step towards making India’s Infrastructure truly world-class.”

                                                    Amitabh Kant, CEO, Chairman, NITI Aayog

“The strategic objective of the program is to unlock the value of an investment in the brownfield public sector assets by tapping institutional and long term patient capital which can thereafter be leveraged for further public investment.”

                                                     Rajeev Kumar, Vice Chairman, NITI Aayog

 

References :

http://www.niti.gov.in/national-monetisation-pipeline

https://pib.gov.in/PressReleseDetail.aspx?PRID=1748297

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