National Monetisation Pipeline, 2021

Previously mentioned in the Union Budget 2021-22, the union finance minister Nirmala Sitharaman unveiled the National Monetisation Pipeline (NMP) a week ago. This multi-crore scheme is seen as a rather bold move by the government amidst an economic shock. The move has invited plenty of criticism from the opposition, while some opine that it could prove to be a master-stroke that sets the wheels of economic development in motion. Read on to find out what exactly is this ambitious plan all about!

NMP: A Brief Introduction

Basically, the National Monetisation Pipeline (NMP) aims to ‘monetise’ the ‘core infrastructure assets’ of the Central Government to generate an estimated ₹6.0 lakh crores over a period of four years (FY 2022 to 2025). In essence, through NMP, the Centre envisages tapping the private sector capital, thereby diverting it to the public sector and unlocking higher efficiencies of the languishing brownfield assets owned by the PSUs or the Centre. Further, they plan to utilise the proceeds from this scheme for developing/funding new infrastructure projects.

Now, let’s break this down.

What exactly is ‘asset monetisation’?

Asset Monetisation, at its core, refers to converting non-revenue generating or low-revenue generating assets (tangible or intangible) into cash. There are multiple ways one can monetise an infrastructure asset. For example, rent/lease it out, sell it off or build and utilise it to generate money. However, the NMP lays down monetisation plans only for ‘brown-field assets’ and excludes any selling, divestment or monetisation of non-core assets from its scope.

Green Field v/s BrownField Assets (Source: WallStreetMojo)

How will NMP work?

Broadly, this asset monetisation scheme requires the government and PSUs to part with their already-built but under-utilised core assets, like roads, airports, coal mines and others, for a period of 25-30 years, in exchange for a lump-sum payment at the beginning. The amount will be equal to the present value of expected cash-flows (for the given period), estimated at the current utilisation level. After the said period, there will be a mandatory hand-back of these assets to the government. Therefore, the government envisions NMP as a ‘structured contractual partnership’ and not a ‘slump sale of assets or privatisation.’

Currently covering only languishing brownfield assets owned by the Central Government line ministries and the Central Public Sector Enterprises (CPSEs), the NMP is also underway to collate and monetise such assets owned by the states. The centre is laying down schemes to incentivise the states, to participate in the NMP. Over the medium term, apart from creating new infrastructure through monetisation, NMP also aims to focus on increasing employment opportunities, thereby accelerating economic growth.

The Asset Monetisation Framework and Implementation

The roadmap of NMP, formulated by the Niti Aayog, in consultation with the finance and infrastructure line ministries, is launched in two volumes. While Volume I covers the ‘conceptual approaches and potential models for asset monetisation,’ Volume II dictates the ‘actual roadmap for monetisation, including the pipeline of core infrastructure assets under Central Govt.’ For smooth execution, implementation and monthly review of the Asset Monetisation Programme, the government has also constituted an empowered committee called the Core Group of Secretaries on Asset Monetization (CGAM). The Cabinet Secretary will head this committee. Additionally, the government has launched a real-time monitoring dashboard. Apart from this, the finance minister will also hold quarterly reviews of the implementation plan.