National Monetisation Pipeline (NMP)

In News

• A 4 year National Monetisation Pipeline (NMP) has been unveiled by the Finance Minister.
  • This monetisation will create further value for infrastructure creation in the country 
  • It will explore innovative ways of private participation without transfer of government ownership.

About 

• It is a 4 year program worth Rs 6 lakh crore to unlock value in brownfield projects.
• It will do so by engaging the private sector, transferring to them the rights and using the funds for infrastructure creation across the country.
• Please note that there will be no ownership transfer in projects.
  • There should be mandatory handback.
• It will cover only 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. 

Sectors Covered:

• Top five sectors in terms of value capture around 83 per cent of the aggregate pipeline value, with 
  • Roads: 27 percent
    • It includes 26,700 km of roads, railway stations, train operations and tracks
  • Railways: 25 percent
  • Power: 15 percent
    • 28,608 CKT km worth of power transmission lines, 6 GW of hydroelectric and solar power assets will be monetised.
    • (Note: Roads, railways and power sector assets will comprise over 2/3rd of the total estimated value of the assets to be monetised.)
  • Oil & gas pipelines: 8 percent
    • 8,154 km of natural gas pipelines and 3,930 km of petroleum product pipelines are up for the bid.
  • Telecom: 6 percent. 
    • 2.86 lakh of km fibre assets and 14,917 towers in the telecom sector are being opened up for the private sector.
• The rest will come from other sectors including mining, aviation, ports, warehouses and stadiums.
  • 15 railway stadiums, 25 airports and the stake of the Central government in existing airports and 160 coal mining projects, 31 projects in nine major ports, 210 lakh MT of warehousing assets are among those which will be up for monetisation.
• In terms of annual phasing by value, 15 percent of assets with an indicative value of Rs 88,000 crore are envisaged to be rolled out in the current financial year.

Key Provisions of the NMP

• Real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) are structures being used to monetise assets in the roads and power sectors.
• NITI Aayog, in coordination with the Finance ministry, has created the NMP dashboard and the detailed roadmap 
  • These protocols and dashboard are the result of  a series of discussions with stakeholders, global investors and state governments.
• Central Government’s Assistance to State Governments
  • To encourage states to pursue monetisation, the Central government has already set aside Rs 5,000 crore as incentive.
  • If a state government divests its stake in a public sector undertaking, the Centre will provide a 100 percent matching value of the divestment to the state. 
  • Similarly, if a state lists a public sector undertaking in the stock markets, the Central government will give it 50 percent of that amount raised through listing.
  • Finally, if a state monetises an asset, it will receive 33% of the amount raised from monetisation from the Centre.
• Implementation Mechanism
  • Contractual partners will have to adhere to Key Performance Indicators and Performance Standards.
  • NMP progress, with yearly targets will be monitored through monthly review by an empowered committee chaired by the Cabinet Secretary. 
  • NITI Aayog has a Public Private Partnership Cell and has engaged transaction advisors. 
    • They will handhold any ministry for any support it needs in pursuing the monetisation roadmap
• Co-Terminus with National Infrastructure Pipeline
  • The NMP will run co-terminus with the National Infrastructure Pipeline of Rs 100 lakh crore announced in December 2019. 
  • The estimated amount to be raised through monetisation is around 14 percent of the proposed outlay for Centre of Rs 43 lakh crore under NIP.

Expected Benefits of the Scheme

• Innovative way of Private Participation:
  • Private sector is well known for its efficiency and technology.
  • NMP will provide a way to exploit the strength of the Private sector for infrastructure creation without transfer of ownership.
• Ensure Further investment in Infrastructure Building:
  • It will help to properly monetise under utilised brownfield projects
• Revival of the economy and create sustainable demand
• Spillover effect of infrastructure is high on cycle of demand
• De-risked projects as it is brownfield
  • Land Acquisition is a big challenge in Greenfield projects.

Key Challenges

• Lack of identifiable revenue streams in various assets, 
• Level of capacity utilisation in gas and petroleum pipeline networks, 
• Dispute resolution mechanism, 
• Regulated tariffs in power sector assets, and 
• Low interest among investors in national highways below four lanes, according to the NMP framework. 
• Analysts also point to issues such as the lack of independent sectoral regulators as potential impediments.

Conclusion

• Monetisation of assets is not new.
• But the government has finally organised it in baskets, set targets, identified impediments, and put in place a framework. 
• While unlocking assets worth Rs 6 lakh crore is an ambitious plan, resolving the impediments is expected to bring investors.

Source: IE