On 23rd August 2021, India launched the asset monetisation pipeline of federal ministries and public sector entities – the “National Monetisation Pipeline” (NMP). Formulated by the government think tank, Niti Aayog, and announced by Finance Minister Nirmala Sitharaman, this scheme was proposed during the 2021-2022 Federal Budget in February 2021. It would be active during the fiscal period of 2022 to 2025 and seeks to attract investments worth INR 6 lakh crore from the private sector by monetising its core assets in 13 strategic sectors. According to Nirmala Sitharaman, the NMP is envisaged not just as an infrastructure funding mechanism but also as an overall “paradigm shift in infrastructure operations, augmentation, and maintenance”.
In asset monetisation, the government parts with assets such as roads, railways, coal mines, etc. for a specific period of time for a lump sum payment. The assets are not sold but would be returned to the government at the end of the specified time period, in this case, at the end of the 2025 fiscal year. The idea is to create new sources of revenue by unlocking the value of assets that have been unutilized or underutilized till now. These previously unexplored sources of income for the company and its shareholders would additionally create a more accurate estimation of the value of the government’s assets and allow for better financial management of these resources in the future.
In the case of the NMP, asset monetisation would happen primarily in the roadways, railways, and power generation sectors, with an additional focus on air and sea ports, telecom, stadiums, and power transmission. The maximum value is expected to come from the roadways sector, where NHAI highways worth INR 1.6 lakh crore have been identified. The railways sector is a close second in terms of value with about 400 stations, 150 trains, and some tracks having been identified as worth INR 1.5 lakh crore.
The COVID-19 pandemic related global financial meltdown, combined with a domestic economic slowdown created a scenario of a contracted GDP, widening fiscal deficit, and rising public debt levels. The National Monetisation Plan is a tactical and politically safe option to immediately address the fiscal consequences of the aforementioned issues.
Monetisation can enhance the productivity of Public Sector Undertakings (PSU) by restructuring business units without changing the enterprise ownership profile. If done right, the NMP has the potential to create a new class of mid-sized next-gen infrastructure entrepreneurs. Instead of making the risky and capital intensive move of buying an entire PSU, entrepreneurs can opt to buy segments of a PSU’s assets to establish a portfolio for themselves in the infrastructure space. The NMP’s idea of revitalizing public assets through the private sector is likely to garner long-term, stable returns. In addition, Finance Minister Nirmala Sitharaman announced the creation of an Asset Monetisation dashboard which would show the progress that the leased
public sectors are making, ensuring transparency from the government’s side and allowing investors to easily track their investments.
Therefore, a wide range of new and lucrative investment opportunities have become available to investors as a result of the government’s asset monetisation plan. And in order to help you navigate through the intricacies of the NMP, we at ASA offer a variety of services. With our team of dedicated, experienced, and highly qualified professionals from diverse educational backgrounds, we are confident that we can assist you in making the best decisions to ensure your financial success.
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