It was during the presentation of the 2021 budget to Parliament that Finance Minister Nirmala Sitharaman announced that the Union government would create a national monetization pipeline (NMP) of “potential brownfield infrastructure assets” with a view to to generate funds for the ambitious National Infrastructure Pipeline (NIP) that it released in 2019. Now, as NMP is launched with an eye on “Rs 6 lakh crore monetization potential” over four years between FY2022 and FY2025, here’s what you need to know.
How will NMP help you?
Monetization of assets is a key objective of the Center as a “means of leveraging innovative and alternative financing for infrastructure”. In a statement ahead of the launch of the NMP, NITI Aayog said that “the NMP comprises a pipeline of four government brownfield infrastructure assets,” which constitutes the “medium-term road map” of its plans for monetization of assets.
“Brownfield” indicates any existing asset or project that a new entity leases to create a new business.
The Department for Investment and Public Asset Management (DIPAM), which is part of the Union’s Ministry of Finance, states on its website that “the monetization of assets involves the creation of new sources of income by unlocking the value of public assets so far unused or underutilized ”.
Why was NMP launched?
DIPAM asserts that the monetization of assets under government control “is widely seen as a very important but insufficiently explored public financing option for the management of public resources,” adding that “at the international level, it is recognized that public assets are a important resource for all economies ”.
“Many public sector assets are being used sub-optimally and could be appropriately monetized to create increased financial leverage and value for businesses and the capital that the government has invested in them,” says DIPAM, adding that the ‘idea “is to unlock the value of investments made in public assets which have so far failed to produce appropriate or potential returns.”
The asset monetization program, according to the NITI Aayog memo, would provide “visibility to investors” even if it creates “hitherto unexplored sources of revenue for the company and its shareholders, and would contribute to a more accurate estimate. of public assets, which would help in better financial management of government / public resources over time ”.
What types of assets will be monetized?
NITI Aayog, who prepared the report on the NMP, said in a statement that the line ministries of infrastructure included in the pipeline cover roads, transport and highways, railways, electricity, pipelines and natural gas, civil aviation, seaports and waterways, telecommunications, food and Public Distribution, Mines, Coal and Housing and Urban Affairs.
Thus, the key sectors that are part of the NMP are roads, ports, airports, railways, warehousing, gas and product pipelines, power generation and transmission, mining, telecommunications, stadiums, hotels and housing.
“The strategic objective of the program is to unlock the value of investments in brownfield public sector assets by tapping long-term institutional and patient capital, which can then be used for other public investments,” said the Vice President of NITI Aayog, Dr Rajiv Kumar. the press release. He added that the process of fundraising through NMP would involve “a structured contractual partnership against privatization or mass sale of assets.”
“The primary ownership of the assets under these structures therefore continues to belong to the government with the framework providing for the return of assets to the public authority at the end of the life of the transaction,” he said. declared.
To continue the implementation and monitoring of the pipeline, “a small group of secretaries empowered to monetize assets (CGAM) under the chairmanship of the secretary of the Cabinet has been formed”.
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