National Monetization Pipeline (NMP) : Breaking Down 6 Lakh Crore  NMP

A government programme has started that is expected to make $9 billion (Rs. 6 lakh crore) in revenue by selling of state-owned properties in the next four years.

We should start with the basics before diving into the specifics.

Revenue is generated through assets, such as cash being earned by leasing out a building to someone. We think you’ll be able to connect the dots without much effort. But let’s skip the discussion and go straight to the plan.

What Is National Monetization Pipeline (NMP)

NMP provides ‘visibility’ on the volume of assets to be monetised and the potential value that can be unlocked. The Government’s commitment to scale up infrastructure investments despite the fiscal pressures reflects the critical role of infrastructure on the overall economic growth and recovery and expected multiplier effect. NMP shall also serve as a medium – term roadmap of the potential financing opportunities and drive preparedness of public sponsor as well as private sector/ institutional investors towards financing the infrastructure gap.

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India’s National Infrastructure Pipeline (NIP) envisages an infrastructure investment of Rs 111 lakh crore over the five-year period (FY 2020-25). Financing of infrastructure investments at such scale necessitates a re-imagined approach and tapping alternative financing through innovative ways.

As estimated by the Report of Task Force for NIP (2019), traditional sources of capital are expected to finance 83–85%1 of the capital expenditure envisaged under NIP. About 15- 17% of the aggregate outlay is expected to be met through innovative mechanisms such as Asset Recycling & Monetisation and new long-term initiatives such as Development Finance Institution (DFI).

As per NIP, asset recycling and monetisation mechanism may finance around 5-6% of the aggregate capex under NIP. In the wake of Covid – 19 however, there is a pressing need on the public outlay towards social sector priorities and economic stimuli initiatives, thereby necessitating exploring of alternatives mechanisms such as Asset Monetisation with an increased vigour.

Asset monetisation –

The Union Budget has laid out the importance of “monetising operating public infrastructure assets for new infrastructure construction”. Towards this, the budget provided for preparing a “National Monetisation Pipeline (NMP)” of potential brownfield infrastructure assets and an “Asset Monetisation dashboard” for tracking the progress and to provide visibility to investors.

Key Objectives of NMP are:

Serve as a medium-term roadmap for the line ministries and agencies

ii. Provide medium-term visibility to investors on infrastructure assets pipeline

iii. Provide a platform for ministries to track asset performance

iv. Bring in greater efficiency and transparency in public assets management

The NMP has been created on a best effort basis by aggregating the information provided by various stakeholders including line ministries, departments as well as assessments of secondary information available on existing infrastructure assets in each of the sectors. A bottom-up approach has been adopted wherein the existing core infrastructure asset base managed under central sector agencies was identified and mapped.

The core infrastructure assets covered include roads, ports, airports, telecom, railways, warehousing, energy pipelines, power generation, power transmission, hospitality and sports stadiums. Besides these conventional infrastructure sectors, assets from mining and housing redevelopment sectors have also been included in the NMP owing to the potential of these sectors to spur private sector investment and to enable tracking of transactions as part of the Monetisation pipeline.