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National Monetisation Pipeline

Posted on August 23, 2021 by admin1  60

In News 

Recently, the Union Minister for Finance & Corporate Affairs announced the launch of the National Monetisation Pipeline. 

  • The National Monetisation Pipeline book will also be released.
    • The book has been prepared by Crisil Infrastructure Advisory, an arm of Crisil

Objectives and Need

  • The global pandemic led to the economic crisis in the country which forced the government to increase spending to provide essential relief to vulnerable sections of society. 
  • Thus, the total expenditure of the government has jumped and the revenue of the government has started shrinking. This resulted in a huge rise in borrowing.
  • The government found that monetisation of government- and public sector-owned assets would be an important financing option for new infrastructure construction.

About National Monetisation Pipeline (NMP)

  • The NMP is part of the FY22 Budget announcement. 
    • The Union Budget 2021-22 laid a lot of emphasis on Asset Monetisation as a means to raise innovative and alternative financing for infrastructure 
  • It comprises a four-year pipeline of the Central Government’s brownfield infrastructure assets.
  •  It will be providing visibility to investors and will also serve as a medium-term roadmap for the Asset Monetisation initiative of the Government.
  • The pipeline has been prepared in consultation with Niti Aayog.
  • It will serve as a roadmap for asset monetisation of various brownfield infrastructure assets across sectors including roads, railways, aviation, power, oil and gas, and warehousing.
  • The government has also developed an asset monetisation dashboard for monitoring the real-time progress of NMP. 
  • It aims to unlock the value of investment made in public assets which have not yielded appropriate or potential returns so far.

Other Steps

  • Other core infrastructure assets that will be rolled out under the Asset Monetization Programme are: 
    • These include one InvIT (Infrastructure Investment Trust) each sponsored by the National Highways Authority of India (NHAI) and Power Grid (PGCIL) that will attract international and domestic institutional investors. 
    • Oil and Gas Pipelines of GAIL, IOCL and HPCL 
    • AAI Airports in Tier II and III cities
    • Other Railway Infrastructure Assets 
    • Warehousing Assets of CPSEs such as Central Warehousing Corporation and NAFED among others 
    •  Sports Stadiums.

Significance 

  • It will serve as a medium-term roadmap for unlocking the value of public assets.
  • It will generate returns for PSUs and generate employment.
  • It can also reduce the burden of budgetary support required to strengthen the capital base of the public sector unit. 
    • The funds generated through asset monetisation can also be used for the PSUs’ technology upgrade, hence reducing the reliance on Budgetary support.
  • It would help in the better financial management of government/public resources over time.

What is Asset Monetization?

  • Asset monetisation is the process of creating new sources of revenue for the government by unlocking the economic value of unutilised or underutilised public assets.
  • Internationally, it is recognized that public assets are a significant resource for all economies. 

Global Instances 

  • The monetisation of assets is not a new concept. A number of countries including the United States, Australia, Canada, France and China have effectively utilised this policy. 
  • Indian Scenario 
    • In India, the concept was suggested by a committee led by Vijay Kelkar on the roadmap for fiscal consolidation in 2012. 
      • The committee had suggested that the government start monetisation as a key instrument to raise resources for development. 
      • It asked the government to use these resources for financing infrastructure needs
      • The government has already launched the National Infrastructure Pipeline (NIP), with 6,835 projects in December 2019. The project pipeline has been increased to 7,400. 

 

Source: PIB

 
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