Recently, the Finance Ministry launched the National Monetization Pipeline to generate revenue by unlocking the economic worth of underutilized public assets. The pipeline is designed by NITI Aayog in consultation with infrastructure line ministries.
It is based on the mandate for "Asset Monetization" under Union Budget 2021-22.
In simple words, Asset Monetization is utilizing the asset through monetizing it. For example, McDonald's in railway stations will generate profit for the company and generate revenue for the government in the form of rent. Another simple example, advertise Rments on the boundaries of parks, bus stands, etc will generate revenue for the government in the form of fees.
Through this asset monetization, the ownership remains with the government, but the private sector participates in this process by assisting in exploring actual asset value. It acts as a key means for sustainable infrastructure financing. It is based on the philosophy of Infrastructure Creation through Monetization. Methods of Asset Monetization - Renting/leasing, Public-Private Partnership (PPP), charging fees, etc.
Objectives
The NMP estimates aggregate monetization potential of Rs.6 lakh crores through core assets of the Central Government and Central Public Sector Enterprises, over four years, from FY 2022 to FY 2025.
It targets 20 asset classes under 12 ministries, mainly the roadways and railways.
The private sector would come into these projects through models such as Infrastructure Investment Trust (InvITs), Public-Private Partnerships (PPPs), or Toll-operate-transfer (TOT).
The finance generated from this initiative will be used for the National Infrastructure Pipeline(NIP).
There are three key imperatives in the framework for monetizing core assets:
Significance
Development of assets via utilization of underlying assets.
Multiplier effect - Creation of new infrastructure -> increase employment opportunities -> production will increase -> which will generate income -> thereby enabling high economic growth.
Integrating the rural and semi-urban areas for overall public welfare.
Universal access to high-quality and affordable infrastructure to the common citizen of India.
Collaboration between the public and private sectors for the advancement of socio-economic conditions.
Greenfield project - It is the direct investment in new production facilities to launch a new production activity. It is the principal mode of investing in developing countries.
Brownfield project - The term is used for purchasing or leasing existing production facilities to launch a new production activity.
Asset monetization is fine if executed properly — and that is always a big ‘if’.
This edition of econSHOT is proofread by Keerthana V. The thumbnail art is designed by Asha Mary Regi.
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