National Monetisation PipelineDate: 26 August 2021 Tags: Miscellaneous
The union government has introduced the National Monetisation Pipeline (NMP) worth Rs 6 lakh crore for a period of four years.
The private sector will be engaged to give them temporary revenue rights over brownfield project so that funds can be generated.
NMP will provide a clear framework for monetization and give the investors a list of assets to generate investment interest.
The projects are brownfield (already existing) and already developed without getting revenue. The private sector will generate revenue for a period of four years.
In monetization process, the government transfers revenue rights of specific properties to private entities for a fixed upfront amount, share in revenue or commitment of investment.
Monetizing assets in the roads and power sectors is done through Real estate investment trusts (REITs) and infrastructure investment trusts (InvITs).
Other monetization models include Operate Maintain Transfer (OMT), Maintenance & Development (OMD) and Toll Operate Transfer (TOT), and Operations.
More than 66% of assets under the plan will be roads, railways and power sector assets. Other sectors include telecom, stadiums, mining, natural gas, ports, aviation, warehouses etc.
The NMP will run in sync with the National Infrastructure Pipeline. The monetization will be worth 14% of the centre’s share of 43 lakh crore under NIP.
Attracting private investors in not easy. This has been witnessed in the case of privatization of Air India and also BPCL.
Other challenges include low revenue generation streams, dispute resolution, regulated tariffs, low level of capacity in gas and oil sector, low interest in two lane highways etc.
Creating effective monetization structure in entities having multiple stakeholders is a big challenge in this case.
Properly structuring the monetization transactions, balancing risk profile of assets and effectively executing the project remains a challenge.