15-October-2024-Special-Article

NITI AAYOG – ASSET MONETISATION

The recent revision by the NITI Aayog has increased the asset monetisation target for FY 2024-25 by ₹23,000 crore, bringing the total target to ₹1.9 trillion.

This is part of the broader National Monetisation Pipeline (NMP), which aims to generate ₹6 trillion by monetising public assets over the four-year period (FY 2022-25).

Asset monetisation is an essential component of India’s infrastructure development strategy, as it unlocks the value of underutilised public assets to generate new revenue.

What is Asset Monetisation?

Asset monetisation involves converting public assets into revenue-generating sources without transferring ownership. It allows governments and public bodies to unlock the economic value of underutilised or idle assets.

Purpose:

• The main goal of asset monetisation is to generate financial returns by leveraging public assets without selling them. This includes roads, railways, airports, pipelines, and mobile towers.

Focus on Brownfield Assets:

• The focus is primarily on brownfield assets, which are existing, operational assets that can be improved or optimised to enhance their revenue potential. These assets are typically leased or concessioned to private entities for specific periods.

Difference from Privatisation:

• Unlike privatisation, where ownership is transferred to the private sector, asset monetisation retains public ownership. Private sector partners take over operations and maintenance for a fixed period, bringing in efficiency and investments.

National Monetisation Pipeline (NMP)

The National Monetisation Pipeline (NMP) is an initiative aimed at financing infrastructure development by monetising operational public assets. It has a target of ₹6 trillion through the monetisation of core assets owned by the central government and public sector enterprises.

Preparation of NMP:

• NMP was prepared by NITI Aayog in collaboration with ministries overseeing key infrastructure sectors such as roads, railways, power, telecommunications, and civil aviation.

Sectors Covered:

The NMP focuses on sectors including roads, railways, ports, airports, power generation, transmission, mining, gas pipelines, telecom, and warehousing.

The top 5 sectors contributing to the total pipeline value are:

• Roads (27%)
• Railways (25%)
• Power (15%)
• Oil & Gas Pipelines (8%)
• Telecom (6%)

Monetisation Framework:

• The framework revolves around monetising the “rights” to operate these assets while retaining public ownership. These rights are given for a defined period, after which the assets revert to public authorities.
• The assets chosen are de-risked brownfield assets with stable revenue streams.
• Structured partnerships with private entities are governed by detailed contractual agreements with performance standards and key performance indicators (KPIs).

Link with National Infrastructure Pipeline (NIP):

• The NMP is aligned with the National Infrastructure Pipeline (NIP), which aims to attract investments in key infrastructure projects.
• The proceeds from monetisation are reinvested into new infrastructure projects under the NIP, which has a target of ₹111 trillion.

Instruments for Asset Monetisation

Public-Private Partnerships (PPP):

• These are concession agreements where private entities are awarded contracts to operate and maintain public assets for a fixed period.

Infrastructure Investment Trusts (InvITs):

• InvITs are financial instruments that allow individual and institutional investors to invest directly in infrastructure projects. These trusts offer returns based on the income generated by the underlying infrastructure assets.

Current Status of the National Monetisation Pipeline

Revenue Generation:

• As of FY24, the NMP has generated ₹3.9 trillion, meeting most of its adjusted targets. The original target for this period was ₹4.3 trillion.

Successful Sectors:

• The Ministry of Coal has exceeded expectations, raising ₹1.54 trillion against a four-year target of ₹80,000 crore.
• Additionally, mining assets have generated ₹32,000 crore, surpassing the target of ₹7,300 crore.

Lagging Sectors:

• Railways: Only ₹20,417 crore has been monetised, meeting just 30% of its target.
• Warehousing: Only 38% of its target has been achieved, amounting to ₹8,000 crore.
• Civil Aviation: The sector has significantly underperformed, monetising just 14% of its target of ₹2,600 crore.

Challenges in Implementing NMP

Low Monetisation Target:

• The NMP’s target of ₹6 trillion represents only 5-6% of the total capital expenditure required under the NIP (₹111 trillion). This raises concerns about its impact on overall infrastructure funding.

Missed Disinvestment Targets:

• The sectors identified for monetisation have struggled to meet their disinvestment targets in recent years, raising doubts about the actual realisation of monetisation targets.

Long-Term Rights to Private Players:

• The long-term concession rights (up to 60 years) granted to private entities can be perceived as privatisation, leading to public distrust regarding the government’s intentions.

Lack of Clarity on Proceeds Usage:

• There is no clear guidance on how the proceeds from asset monetisation will be utilised. It remains unclear whether the funds will be directed toward infrastructure development or used for revenue expenditures like salaries and subsidies.

Risk of Monopolisation:

• The consolidation of certain assets (like highways and railway lines) could lead to monopolies, potentially leading to higher user fees for the public.

Public Concerns over Double Payment:

• Taxpayers, who initially funded the development of public assets, are concerned about paying additional fees to private operators once these assets are monetised.

Way Forward

Accelerate Contract-Based Monetisation:

• The government should expedite contract-based asset monetisation through PPP concessions, especially in sectors like railways and airports, where investor interest is strong.

Promote Land Monetisation:

• Developing real estate on public land, such as constructing multi-storey buildings, can create new revenue streams while improving urban infrastructure.

Establish Clear Guidelines for Proceeds Usage:

• NMP should set clear rules for how monetisation proceeds will be treated in the budget. A portion of the funds should be earmarked for infrastructure development to ensure long-term economic benefits.

By addressing these challenges and refining the monetisation framework, India can unlock the potential of its public assets to fuel infrastructure growth and enhance economic development.

Mains Question:

1. “Discuss the significance of the National Monetisation Pipeline (NMP) in India’s infrastructure development. What are the key challenges and opportunities associated with asset monetisation?” (150 WORDS)