Finance Minister Nirmala Sitharaman recently announced a pipeline of assets, which the government is looking to monetise to collect about Rs 6 trillion. The amount will be used to partly fund its ambitious infrastructure projects over four years ending 2024-25. As per recent data, approximately Rs 88,000 crores will be raised under this plan in the current financial year.
The sectors in which assets are being identified to monetise include roads, ports, airports, railways, power generation and transmission, telecom, warehousing, gas and product pipeline, mining, stadium, hospitality as well as housing.
In simple words, asset monetization refers to offering public infrastructure to the players in the private sector or investment business. The entire process is carried out through well-defined methods and procedures.
At the crux of monetisation lies a distinct transition from privatisation to structured partnerships. The private sector operates within clear contractual frameworks.
This process meets two crucial goals - One, it unlocks value from public investment in infrastructure, and two, monetisation drives home the efficiencies of the private sector. Asset monetisation also helps in generating employment and meeting the ever-rising need for enhanced quality of public assets and services.
The National Monetization Pipeline (NMP) is a step in the right direction that will enable private players to enhance the operational capabilities of brownfield infrastructure assets.
Further, it accelerates the development of India’s infrastructure as well as has high potential to attract FDI, thereby positively affecting the domestic capital flow and lowering the deficit.
Asset monetization also adds to the GDP of the economy. This move will encourage privatization and assist the subcontinent to establish a robust avenue for additional revenue, simultaneously leading to more public-oriented developments.
The NMP will ensure that various economic hubs can better utilize the investments done by the government and private players. It will further pave the way for the employment and housing sector to gain momentum and create demand in smaller towns and cities.
The NMP scheme aims to develop a strong and transparent mechanism for monetisation and related endeavours. It is directed to monitor the performance of the initiative as well as aid investors in future planning. Finally, it will assist citizens to participate in the asset class of investing via new models like Infrastructure Investment Trusts and Real Estate Investment Trusts.
(Farshid Cooper is MD, Spenta Corporation)
