Will National Monetisation Pipeline (NMP) succeed in helping government earn revenues?

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The Rs6 trillion National Monetisation Pipeline (NMP) unveiled by finance minister Nirmala Sitharaman on Monday has captured everybody’s attention. However, the Opposition has alleged that the government is trying to sell India’s crown jewels.

Unlocking Capital

The NMP will help the authorities ease fiscal constraints and free up the balance sheets for more greenfield infrastructure creation.

Why is there a need to monetize assets?

In a country like India, with massive infrastructure deficit, finding resources to build physical assets is a daunting task. Hence, the government wants to monetize existing infrastructure assets by leasing them out to private firms for a fixed tenure under a revenue sharing model. It will help the authorities ease fiscal constraints and free up balance sheets for more greenfield infrastructure creation. For example, a stadium built by the government that remains idle for most part of the year can be leased to a private party that can efficiently manage it by organizing cultural functions and allowing the public to use it for a fee.

Is the pipeline a new concept?

No. India has been monetizing assets for a long time through public-private partnership (PPP). The Delhi airport has been built through the PPP mode. The concession period is 30 years after which it will either be renewed or transferred to the Airports Authority of India (AAI). The project that started in 2006 has been completed at a total cost of Rs.12,500 crore, enabling world class infrastructure creation with no additional cost to AAI. In 2020, the Maharashtra State Road Development Corp. Ltd awarded the tolling rights of the Mumbai-Pune Expressway and old Mumbai-Pune corridor for Rs.8262 crore.

Will the money go directly to the government?

Money from projects monetized by central government departments will go to the government. As most of the projects to be monetized are under various central public sector enterprises (CPSEs), the money accured will be received by them. But the Centre often forces CPSEs to declare larger dividends so that this money can be transferred to the Consolidated Fund of India.

Has this worked for other countries?

Asset recycling has been enacted in Australia through the Asset Recycling Initiative (ARI) of the federal government, which during the 2014-15 budget announced the Infrastructure investment in the nation. ARI was aimed at encouraging states to recycle assets and utilize the sale proceeds for productivity enhancing infrastructure by asking private firms to fund and run public infrastructure. This helped unlock more than $17 billion in infrastructure development across Australia.

Is the Rs.6 trillion target achievable in 4 years?

Achieving Rs.6 trillion through asset monetization in four years is daunting task. This will need a coordinated effort and push from the top. A lot will also depend on market conditions. The centre expects the global liquidity surplus to help it achieve the target. As these are de-risked infrastructure projects, it may be easier to monetize than sell Air India or Bharat Petroleum Corp. Ltd through strategic disinvestment. However, the government needs to avoid a situation where a few firms capture most of the assets.

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