Private sector and National Monetization Pipeline

By Lokmat English Desk | Published: November 30, 2021 09:50 PM2021-11-30T21:50:02+5:302021-11-30T21:50:02+5:30

Dr Lakshkaushik Puri The NITI Aayog has developed National Monetisation Pipeline (NMP) based on the mandate for 'Asset Monetisation' ...

Private sector and National Monetization Pipeline | Private sector and National Monetization Pipeline

Private sector and National Monetization Pipeline


Dr Lakshkaushik Puri

The NITI Aayog has developed National Monetisation Pipeline (NMP) based on the mandate for 'Asset Monetisation' under union Budget 2021-22. NMP estimates aggregate monetisation potential of Rs 6 lakh crores through core assets of the Central Government. Government and public sector organisations can adopt Asset Monetisation to meet the ever-increasing needs of the population. The concept is used globally and is widely used amongst businesses. However, suitable structuring of such transactions is extremely critical. Transfer of such rights is in return of an upfront/periodic consideration defined by a concession/contractual framework. Such contracts include provision for transfer of assets back to the public authority when such a contract ends.

Asset Monetisation is when you try to generate wealth but without additional financing. The concept of capital recycling appears to be borrowed from property portfolio management. It means the proceeds from the sale of some properties in a portfolio are put into purchasing new properties, somewhat like share investors rebalancing a share portfolio without additional capital. Monetisation Models are categorised into: (i) Structured Financing models – Fund generation via capital markets or through a pool of investors (ii) Direct Contractual Approach – Contract between a public entity and identified private sector developer(s)/investor(s)

NMP aims to provide a medium term roadmap of the programme for public asset owners. Report on NMP has been organised into two volumes. Monetisation of non-core assets has not been included in the NMP. The process of collation of asset pipeline from states is on-going and will be included in the due course. Currently, only assets of central government ministries and CPSEs in infrastructure sectors have been included.

The period for NMP has been decided so as to be co-terminus with balance period under National Infrastructure Pipeline (NIP). The aggregate asset pipeline over the four-year period, FY 2022-2025, is indicatively valued at Rs 6 lakh crore. The sectors included are roads, ports, airports, railways, warehousing, gas and 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 and gas pipelines (8%) and Telecom (6%).

The government has set up an Implementation and Monitoring Mechanism (IMM) to ensure efficient and effective process of asset monetisation. The aim is to enable 'Infrastructure Creation through Monetisation' wherein the public and private sector collaborate, each excelling in their core areas of competence.

There are few challenges like lack of discernible revenue streams from various assets, the slow pace of privatisation in government-owned enterprises such as Air India and BPCL, Furthermore, the lacklustre bids in the recently launched PPP initiative in trains show that attracting private investors' interest is not easy. Low utilisation of capacity in gas and petroleum pipeline networks, tariffs on assets in the power sector that are regulated may be deterrents. Investors have little interest in national highways with fewer than four lanes.

The government has tried to address many challenges. Owing to infrastructure development in the National Master Plan (NMP), there is a need for an efficient dispute resolution mechanism. The Fifteenth Finance Commission has recommended the setting up of a High-Powered Intergovernmental Group to re-examine fiscal responsibility legislation.

(The writer is Assistant Professor, Commerce, Vinayakrao Patil Mahavidyalaya, Vaijapur).

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