National Monetisation Pipeline (NMP)
Union Minister for Finance and Corporate Affairs, Smt Nirmala Sitharaman, launched the asset monetisation pipeline of Central ministries and public sector entities: 'National Monetisation Pipeline (NMP Volumes 1 & 2)'. NITI Aayog has developed the pipeline, in consultation with infrastructure line ministries, based on the mandate for 'Asset Monetisation' under Union Budget 2021-22. NMP estimates aggregate monetisation potential of Rs 6.0 lakh crores through core assets of the Central Government, over a four-year period, from FY 2022 to FY 2025.
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.
Imperatives for Core Asset Monetisation
The framework for monetisation of core asset monetisation has three key imperatives.
- Monetization of 'Rights' not 'Ownership', Assets handed back to the government at the end of transaction life
- Brownfield de-risked assets, stable revenue streams
- Structured partnerships under defined contractual frameworks with strict KPIs & performance standards
This includes selection of de-risked and brownfield assets with stable revenue generation profile with the overall transaction structured around revenue rights. The primary ownership of the assets under these structures, hence, continues to be with the Government with the framework envisaging hand back of assets to the public authority at the end of transaction life.
Estimated Potential
The aggregate asset pipeline under NMP over the four-year period, FY 2022-2025, is indicatively valued at Rs 6.0 lakh crore. The estimated value corresponds to ~14% of the proposed outlay for Centre under NIP (Rs 43 lakh crore).
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 & gas pipelines (8%) and Telecom (6%).
In terms of annual phasing by value, 15% of assets with an indicative value of Rs 0.88 lakh crore are envisaged to be rolled out in the current financial year (FY 2021-22). However, the aggregate as well as year on year value under NMP is only an indicative value with the actual realization for public assets depending on the timing, transaction structuring, investor interest etc.
What is monetisation?
In a monetisation transaction, the government is basically transferring revenue rights to private parties for a specified transaction period in return for upfront money, a revenue share, and commitment of investments in the assets. Real estate investment trusts (REITs) and infrastructure investment trusts (InvITs), for instance, are the key structures used to monetise assets in the roads and power sectors. These are also listed on stock exchanges, providing investors liquidity through secondary markets as well. While these are a structured financing vehicle, other monetisation models on PPP (Public Private Partnership) basis include: Operate Maintain Transfer (OMT), Toll Operate Transfer (TOT), and Operations, Maintenance & Development (OMD). OMT and TOT have been used in highways sector while OMD is being deployed in case of airports.
Finance Minister Nirmala Sitharaman said: “There is no land here, this entire (NMP) is talking about brownfield projects where investments have already been made, where there is a completed asset which is either languishing or it is not fully monetised or is under-utilised. So by bringing in private participation in this you will be able to monetise it better and ensure further investment in infrastructure building.”
Source: https://pib.gov.in/PressReleseDetail.aspx?PRID=1748297 & https://www.india.gov.in/spotlight/national-monetisation-pipeline-nmp