DNA Explainer: What is the National Monetisation Pipeline?

Yesterday on August 23, India’s Union Minister of Finance Nirmala Sitharaman launched the National Monetisation Pipeline (NMP). THE scheme aims to monetise core assets under the Central Government to the tune of Rs 6.0 lakh crores over a period of four years, from FY22 to FY25.

The NMP's two-volume roadmap has been formulated by NITI Aayog in consultation with infrastructure line ministries, under the ‘Asset Monetisation’ mandate of the Union Budget 2021-22.

Under the NMP, the government envisions “structured contractual partnership” instead of “privatization or slump sale of assets.”

The National Monetisation Pipeline comprises a 4-year pipeline of the Central Govt's brownfield infrastructure assets.

Besides providing visibility to investors, #NMP will serve as a medium-term roadmap for the Asset Monetisation initiative of the Govt. https://t.co/1tEfm6hdKw pic.twitter.com/Z2uEe3tK5f

— NITI Aayog (@NITIAayog) August 23, 2021

How the assets will be monetised?

Identified as the key means for sustainable infrastructure financing, the scheme prepares a monetisation pipeline of potential brownfield infrastructure assets. Brownfield stands for projects which aim at improving or operation infrastructures that are already build and are leased or purchased by an entity.

Providing a medium-term roadmap for public asset owners; the NMP lays down the “conceptual approaches and potential models for asset monetisation” as well as the “actual roadmap for monetisation, including the pipeline of core infrastructure assets under Central Govt.”

An empowered committee has been constituted to implement and monitor the Asset Monetization programme. The Core Group of Secretaries on Asset Monetization (CGAM) will be headed by the Cabinet Secretary.

The sectors in which assets are being identified to monetise include roads, ports, airports, railways, power generation and transmission, telecom, warehousing, gas & product pipeline, mining, stadium, hospitality and housing.

NMP does not include monetisation plans through disinvestment or through programmes linked to non-core assets.

While the NMP currently includes only assets under central government line ministries and Central Public Sector Enterprises (CPSEs) in infrastructure sectors, the process to collate and coordinate the asset pipeline of states is also underway.

The aim behind National Monetisation Pipeline

As per FM Sitharaman, “Asset monetisation, based on the philosophy of Creation through Monetisation, 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.”

This Asset Monetisation Pipeline is talking about brownfield assets which need to be better monetised. Ownership of assets remains with the govt. There will be a mandatory hand-back; they will have to give it back after a certain time: Smt @nsitharaman pic.twitter.com/9WtJsTyDpE

— NSitharamanOffice (@nsitharamanoffc) August 23, 2021

The aim of the NMP scheme is to develop a system and a transparent mechanism towards asset monetisation. It aims to monitor the performance of the initiative as well as help investors plan future activities.

The government envisages asset monetisation as more than just a funding mechanism and instead an overall “paradigm shift in infrastructure operations, augmentation and maintenance”, aiming to leverage resource efficiencies and ability of the private sector to "dynamically adapt to the evolving global and economic reality”.

Common individuals will be able to participate in asset class of investing through new models such as Infrastructure Investment Trusts and Real Estate Investment Trusts.

Among the key imperatives of the scheme is selecting “de-risked and brownfield assets” that have “stable revenue generation profile”. The overall transaction will be structured around revenue rights as the government will continue to retain the primary ownership of such assets. There will be a framework through which the assets will be handed back to the public authority after the end of a stipulated period.

The assets and transactions will be undertaken with the help of a variety of direct contractual and capital market instruments, depending on parameters like sector, nature of asset, timing of transactions etc. There will be necessary policy and regulatory interventions as and when needed. An asset monetisation dashboard for real-time monitoring is also in the pipeline.