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National Monetization Pipeline

27 Aug National Monetization Pipeline

Posted at 03:48h in current-affair by
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National Monetization Pipeline

 

Context:

 

The National Monetization Pipeline for brownfield infrastructure assets has been launched by the Union Finance Minister.

About:

Asset Monetization:

 

  • Asset Monetization is the process of unlocking the value of previously under utilized or unutilized public assets in order to generate new revenue streams.
  • Public assets are acknowledged as a valuable resource for all economies on a global scale.
  • Many public sector assets are underutilized and might be properly monetized to increase financial leverage and value for the enterprises and the government’s equity investments in them.
  • This aids in the accurate assessment of public assets, resulting in better government/public resource financial management over time

 

National Monetization Pipeline:

 

  • The NMP is a four-year pipeline of brownfield infrastructure assets owned by the federal government.
  • Apart from giving investors visibility, it will function as a medium-term plan for the government’s Asset Monetization initiative.
  • In fact, the Union Budget for 2021-22 places a strong emphasis on Asset Monetization as a means of obtaining creative and alternative infrastructure financing.
  • It’s important to stress that the government sees asset monetization as a strategy for infrastructure expansion and upkeep, not just a way to raise money.

 

Asset Monetization Plan:

 

  • The NMP is designed to be a medium-term roadmap for identifying prospective monetization-ready projects in a variety of infrastructure sectors.
  • Over a four-year period, from FY 2022 to FY 2025, it anticipates a total monetization potential of Rs 6.0 lakh crores through the Central Government’s main assets.

The program’s objectives:

  • NMP aspires to provide the ordinary person of India with universal access to high-quality, inexpensive infrastructure.
  • Asset monetization, which is founded on the principle of “Creation via Monetization,” aims to attract private sector investment for the construction of new infrastructure.
  • This is required for the creation of jobs, allowing for strong economic growth and the seamless integration of rural and semi-urban areas for general public welfare.
  • The program’s strategic goal is to leverage institutional and long-term patient capital to unlock the potential of investments in brownfield public sector assets.

 

Framework of Program:

  • Three essential imperatives underpin the paradigm for monetizing core assets:
  1. Monetization of ‘Rights’ rather than ‘Ownership,’ with assets returned at the end of the transaction.
  2. Brownfield assets with low risk and predictable revenue sources
  3. Establish a contractual structure with clear KPIs and performance requirements for the collaboration.
  • The pipeline was built using input and collaboration from the relevant line ministries and departments, as well as an assessment of the entire asset base available.
  • The NMP excludes monetization through disinvestment or non-core asset monetization.
  • In addition, only assets owned by central government line ministries and CPSEs in the infrastructure sector are now included.
  • The process of coordinating and aggregating state asset pipelines is currently underway, with the goal of incorporating it as soon as possible.

Potential Estimation:

  • Over the four-year period FY 2022-2025, the total asset pipeline under NMP is expected to be worth Rs 6.0 lakh crore.
  • The predicted sum is equal to 14% of the Centre’s proposed spending under NIP (Rs 43 lakh crore). This report covers more than 12 line ministries and over 20 asset classes, including roads, ports, airports, railroads, warehousing, gas and product pipelines, electricity generation and transmission, mining, telecom, stadiums, hospitality, and housing.
  • The top five industries account for 83 percent of the entire pipeline value (in terms of expected value). The top five industries are roads (27 percent), railways (25 percent), power (15 percent), oil and gas pipelines (8 percent), and telecoms (8 percent) (6 percent).

 

Mechanisms for Implementation and Monitoring:

  • As a general approach, the government will retain a major portion of the asset base.
  • The government is expected to support the initiative with essential legislative and regulatory actions to enable an efficient and effective asset monetization process.
  • Streamlining operating protocols, increasing investor engagement, and improving commercial efficiency are just a few of the things that will be done.
  • A separate dashboard will be used to monitor the situation in real time.

 

Source: PIB

Syllabus:  GS 3 (Economy)

 

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