An Overview of the National Monetization Pipeline
The Union Budget for 2021-22 identifies the monetization of operational public infrastructure assets as a significant source of long-term infrastructure funding. The Budget included funding for the creation of a “National Monetisation Pipeline (NMP)” of prospective brownfield infrastructure assets to help with this. The report on NMP was developed by NITI Aayog in cooperation with infrastructural ministries.
The NMP seeks to offer public asset owners with a medium-term plan of the programme, as well as visibility on prospective assets to the private sector. The NMP report is divided into two volumes. Volume I is organised as a guidebook, outlining basic methods and probable asset monetisation models. Volume II is the real monetisation strategy, which includes the pipeline of essential infrastructure assets under the control of the Central Government.
- The pipeline was built using input and collaboration from the relevant line ministries and departments, as well as an assessment of the overall asset base available.
- The NMP does not include monetization through disinvestment or monetization of non-core assets. In addition, only assets owned by central government line ministries and CPSEs in the infrastructure sector are presently included.
- The process of coordinating and collating state asset pipelines is now underway, with the goal of include it in due time.
There are three major imperatives in the framework for core asset monetisation.
This involves selecting de-risked and brownfield assets with a consistent revenue generation profile, as well as structuring the deal around revenue rights. The government retains primary ownership of the assets under these arrangements, with the framework requiring asset handover to the public body at the conclusion of the transaction life.
- Because infrastructure construction is intrinsically connected to monetisation, the NMP period has been set to coincide with the National Infrastructure Pipeline’s balance period (NIP).
- The total asset pipeline under NMP is estimated to be worth Rs 6.0 lakh crore over the four-year period FY 2022-2025. The anticipated amount is equal to 14% of the proposed spending for the Centre under NIP (Rs 43 lakh crore).
- There are more than 12 line ministries and more than 20 asset classes included in this. Roads, ports, airports, railroads, warehouses, gas and product pipelines, electricity production and transmission, mining, communications, stadiums, hotels, and housing are among the industries covered.
- The top five sectors (in terms of estimated value) account for 83 percent of the total pipeline value. Roads (27 percent), railways (25 percent), power (15 percent), oil and gas pipelines (8 percent), and telecommunications (8 percent) are the top five sectors (6 percent ).
- In terms of yearly phasing by value, 15% of assets with an estimated value of Rs 0.88 lakh crore are expected to be rolled out this fiscal year (FY 2021-22).
- However, the aggregate as well as year-over-year value under NMP is merely an estimate, with actual public asset realisation depending on timing, transaction structuring, investor interest, and other factors.
- The NMP’s assets and transactions are intended to be implemented using a variety of instruments. Direct contractual mechanisms, such as concessions in public-private partnerships, and capital market instruments, such as Infrastructure Investment Trusts (InvIT), are examples of these.
- The sector, type of the asset, timing of transactions (including market considerations), target investor profile, and amount of operational/investment control anticipated by the asset owner, among other factors, will influence the instrument selection.
- The asset monetisation value that is intended to be realised by the public asset owner may be in the form of upfront accruals or private sector investment.
- The potential value determined by NMP is simply a rough estimate based on a few rules of thumb. This is based on a variety of methodologies, such as market, cost, book, and enterprise value, as appropriate and accessible for particular industries.
Mechanisms for Implementation and Monitoring
- As a general policy, the government will retain a large portion of the asset base.
- The government is expected to support the initiative with appropriate legislative and regulatory measures to guarantee an efficient and effective asset monetisation process.
- Streamlining operating procedures, promoting investor involvement, and enabling commercial efficiency are just a few of the things that will be done.
- The asset monetisation dashboard, which is expected to be launched soon as part of the Union Budget 2021-22, will provide real-time monitoring.
It was produced by NITI Aayog in cooperation with infrastructure line ministries, based on the Union Budget 2021-22 mandate for ‘Asset Monetisation.’
Objectives of National Monetization Pipeline :
- To unleash the value of investments in brownfield public sector assets by leveraging institutional and long-term resources for future public investments.
- A brownfield investment is one in which a corporation or government body buys or rents existing manufacturing facilities in order to start a new business.
- To enable ‘Infrastructure Creation via Monetisation,’ in which the public and private sectors combine to produce socio-economic progress, each excelling in their core areas of competence.
The following are the plan’s main features:
Pipeline for National Monetization
- The National Monetisation Pipeline is a four-year pipeline of the central government’s brownfield Infrastructure Assets that runs from 2022 to 2025.
- Railways, airports, and coal mining are the top three asset monetisation industries identified.
- Aside from this, the plan will include assets such as highways, electricity transmission lines, and gas pipelines.
- Private companies can use Infrastructure investment trusts (InvITs) to invest in projects for a defined return and then maintain and develop the assets for a specified period before returning them to the government agency.
- As a result, the government will retain ownership of the assets, with an obligatory handover after a specified period of time.
- Furthermore, only underutilised assets will be monetised, and the strategy will aid in the identification of brownfield assets that require greater monetisation.
National Monetisation Pipeline (NMP) Challenges:
The following are the major difficulties that may have an impact on the NMP roadmap:
- Lack of discernible revenue streams in various assets, capacity utilisation in gas and petroleum pipeline networks, etc.
- In the absence of a proper mechanism for resolving disputes,
- Tariffs in the power industry are regulated.
- Investors have shown little interest in national highways with fewer than four lanes.
- Potential constraints include a lack of independent sectoral regulators.
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