National Monetisation pipeline

The government has unveiled a four-year National Monetisation Pipeline (NMP) worth an estimated Rs 6 lakh crore. It aims to unlock value in brownfield projects (where investments have already been made) by engaging the private sector, transferring to them revenue rights in the projects, and using the funds generated for infrastructure creation across the country.
The planned sales are in line with Prime Minister Narendra Modi’s strategic divestment policy, under which the state will retain presence in only a few identified sectors with the rest privatized.
The government has announced that the asset monetisation does not involve selling of land and it is about monetising brownfield assets.
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.
The NMP has been announced to provide a clear framework for monetisation and give potential investors a ready list of assets to generate investment interest.

In a monetisation transaction, the government is basically transferring revenue rights to private parties for a specified transaction period in return for upfront money, a revenue share, and commitment of investments in the assets.
Real estate investment trusts (REITs) and infrastructure investment trusts (InvITs), for instance, are the key structures used to monetise assets in the roads and power sectors. These are also listed on stock exchanges, providing investors liquidity through secondary markets as well.
While these are a structured financing vehicle, other monetisation models on PPP (Public Private Partnership) basis include: Operate Maintain Transfer (OMT), Toll Operate Transfer (TOT), and Operations, Maintenance & Development (OMD). OMT and TOT have been used in the highways sector while OMD is being deployed in case of airports.

Roads, railways and power sector assets will comprise over 66% of the total estimated value of the assets to be monetised, with the remaining upcoming sectors including telecom, mining, aviation, ports, natural gas and petroleum product pipelines, warehouses and stadiums.
The NMP will run co-terminus with the National Infrastructure Pipeline of Rs 100 lakh crore announced in December 2019.

The assets on the NMP list include: 26,700 km of roads, railway stations, train operations and tracks, 2,8608 circuit kilometer worth of power transmission lines, 6 GW of hydroelectric and solar power assets, 2.86 lakh km of fibre assets and 14,917 towers in the telecom sector, 8,154 km of natural gas pipelines and 3,930 km of petroleum product pipelines. In the roads sector, the government has already monetised 1,400 km of national highways worth Rs 17,000 crore.
Also, 15 railway stations, 25 airports and the stake of central government in existing airports and 160 coal mining projects, 31 projects in 9 major ports, 210 lakh MT of warehousing assets, 2 national stadia and 2 regional centres, will be up for monetisation.

Among the key challenges that may affect the NMP roadmap are: lack of identifiable revenues streams in various assets, level of capacity utilisation in gas and petroleum pipeline networks, dispute resolution mechanism, regulated tariffs in power sector assets, and low interest among investors in national highways below four lanes.
While the government has tried to address these challenges in the NMP framework, execution of the plan remains key to its success. Structuring of monetisation transactions is being seen as key.
The slow pace of privatisation in government companies including Air India and BPCL, and less-than-encouraging bids in the recently launched PPP initiative in trains, indicate that attracting private investors’ interest is not that easy.

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