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Current Affairs

National Monetisation Pipeline

Date: 26 August 2021 Tags: Miscellaneous

Issue

The union government has introduced the National Monetisation Pipeline (NMP) worth Rs 6 lakh crore for a period of four years.

 

Details

The private sector will be engaged to give them temporary revenue rights over brownfield project so that funds can be generated.

 

Objective

  • 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.

 

Monetization

  • 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.

 

Plans

  • 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.

 

Challenges

  • 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.

 

Risks

Properly structuring the monetization transactions, balancing risk profile of assets and effectively executing the project remains a challenge.