National Monetisation Pipeline: Unlocking Value in Brownfield Projects

• 24 Aug 2021

On 23rd August 2021, Union Minister for Finance and Corporate Affairs launched a four year (FY2022-FY2025) National Monetisation Pipeline (NMP) worth Rs 6 lakh crore to unlock value in brownfield projects by engaging the private sector, transferring to them the rights but not the ownership in projects; and using the funds for infrastructure creation across the country.

• The pipeline has been developed by NITI Aayog, in consultation with infrastructure line ministries, based on the mandate for ‘Asset Monetisation’ under Union Budget 2021-22.
• The NMP period has been kept co-terminus with the remaining period of the National Infrastructure Pipeline (NIP).

Need

• Developed in the backdrop of the unprecedented Covid-induced economic and fiscal shocks, NMP lists out assets and asset classes, under various infrastructure ministries, which will be monetised over a period of time.
• India is transitioning from an agrarian economy to a service sector economy giving a boost to urbanization and hence creating a need for a robust infrastructure.
• India needs to spend about US$ 1.4 Tn on Infrastructure to reach the target GDP of US$ 5 Tn by 2024-25.
• The National Infrastructure Pipeline (NIP) unveils the infrastructure projects across various states which will receive the expected funding of US$ 1.4 Tn over the next 5 years.

Key Objectives of NMP

The end objective of this initiative is to enable ‘infrastructure creation through monetisation’ wherein the public and private sector collaborate, each excelling in their core areas of competence, so as to deliver socio-economic growth and quality of life to the country’s citizens. Also,

• 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, and
• bring in greater efficiency and transparency in public assets management.

Top Five Sectors for Monetization

• 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%).

Sector wise Monetisation Pipeline over FY 2022-25 (Rs crore)

Highlights

• This pipeline will only include brownfield assets owned by the government, and will not include land assets of the government.
• This will monetize government's existing asset base and use the proceeds to boost infrastructure.
• Under the newly announced National Monetisation pipeline, government assets covers about 14% of Centre's outlay and NMP covers over 20 asset classes and 12 line ministries.
• Centre to incentivise States to monetise their assets
  • Incentives to be given as 50-year interest-free loans.
  • Upto Rs 5,000 crore already budgeted in the current year.
  • If the states divest a PSU, they will receive 100% as financial assistance.
  • If they monetize the asset, they will receive 33% of that amount.
  • If states list a public company in the stock markets, the government will be give them 50% of that amount.
• Roads, railways and power to be priority sectors
  • Rs 1.6 lakh crore worth national highways of NHAI.
  • Rs 67,000 crore worth transmission lines from Power Grid.
  • Rs 32,000 crore worth Hydro, Solar, and Wind projects from NHPC, NTPC, and Neyveli Lignite.
  • 400 stations, about 150 trains, tracks and woodshed worth Rs 1.5 lakh crore.