National Monetization Pipeline (NMP)
Finance Minister, Nirmala Sitharaman launches the National Monetization Pipeline scheme. Through the Govt. aims to raise $81 billion by leasing out state-owned infrastructure assets over the next 5years.
Keypoints of NMP
- MNP in detail
- Objectives
- Sectoral breakup
- Monetization through MNP
- Benefits of MNP
- Conclusion
National Monetization Pipeline scheme In Details
The creation of the National Monetization Pipeline (NMP) is the Government of India’s pioneering initiative to establish a medium-term pipeline along with a roadmap for “monetization ready” assets. The Centre aims to hand gas pipelines, roads, and telecom towers among other assets to private firms on a long-term lease. A look at the sector-wise monetization pipeline.
Objectives of National Monetization Pipeline
- Serve as a medium-term roadmap for the line ministries and agencies
- Provide medium-term visibility to investors on infrastructure assets pipeline.
- Provide a platform for ministries to track asset performance.
- Bring in greater efficiency and transparency in public assets management.
Monetization through disinvestment and monetization of non-core assets (such as land, building, and pure-play real estate assets) have not been included in the NMP.
Assets that are central to the business objectives of a public entity/ statutory body/Government body and/or are being utilized for delivering infrastructure services to the public/ users have been categorized as Core Assets for the purposes of monetization. For each sector, the NMP has been drawn up for the statutory bodies, public sector enterprises, and other such undertakings within the purview of ministries/ departments.
SECTORAL BREAKUP :
- The aggregate asset pipeline over FY22-25 under NMP is indicatively valued at Rs 6.0 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%).
- Roads and Railways together contribute 52% of the total NMP value.
- 20+ asset classes
- 12+ line ministries / departments
- Top 3 sectors: Roads (27%) Railways (26%) and Power (15%) by value
- Pipeline Phasing: 15% of assets
- value of Rs 0.88 lakh to be rolled out in FY 21-22
Top 3 Asset classes:
- Toll, Roads, Railway Stations & Transmission towers
MONETIZATION IN National Monetization Pipeline scheme
In a monetization 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, for instance, are the key structures used to monetize 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 structured financing vehicles, other monetization models on PPP (Public Private Partnership) basis include:
Operate Maintain Transfer (OMT),
Toll Operate Transfer (TOT), and
Operations, Maintenance & Development (OMD).
CHALLENGES
- Lack of identifiable revenue streams in various assets.
- The slow pace of privatization in government companies including Air India and BPCL.
- Further, less-than-encouraging bids in the recently launched PPP initiative in trains indicate that attracting private investors’ interest is not that easy.
Asset-specific Challenges:
- Low Level of capacity utilization in gas and petroleum pipeline networks.
- Regulated tariffs in power sector assets.Low interest among investors in national highways below four lanes.
BENEFITS OF National Monetization Pipeline scheme
- NMP will help in evolving a common framework for the monetisation of core assets.
- It will critically clarify its distinction from privatization, eventually helping to create a virtuous cycle of ‘develop, commission, monetise and invest’.
- It will also help in identifying potential “Monetisation-ready” projects, across various infrastructure sectors/ ministries and simultaneously provide visibility to investors.
- Helps new asset creation without increasing debt levels or taxes or through reallocation of resources from other public services/ welfare activities.
- Targets efficiency gains, competition and improved performance monitoring
- Enhances investment opportunities, depth and liquidity in infrastructure
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