National Monetization Pipeline: Market Analyst Deepak Talwar sheds light on new program

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September 06, 2021 3:59 PM

The decisions, as quoted by the government of India, have been made after taking into account the inputs and consultations from line ministries and departments.

infra, governmentThe proposal vows to introduce a clear framework for monetisation and give potential lift to the Indian economy without pressuring government finances.

Union Minister for Finance and Corporate Affairs, Nirmala Sitharama, unveiled a National Monetisation Pipeline (NMP), aiming to raise Rs 6 lakh crore by leasing out state-owned assets over the next four years. The proposal vows to introduce a clear framework for monetisation and give potential lift to the Indian economy without pressuring government finances. Seasoned market analyst Deepak Talwar explains that NMP is envisaged as a medium-term plan, and will help in identification of projects, which can be easily leased out to generate profits.

To understand how NMP would work, Talwar stated that it has three core mandates – monetisation of rights and not ownership; brownfield de-risked assets and stable revenue streams; and structured partnerships under defined contractual frameworks with strict KPIs and performance standards.

The decisions, as quoted by the government of India, have been made after taking into account the inputs and consultations from line ministries and departments. Presently, only the assets of central government line ministries and CPSEs have been included. The pipeline has been developed by NITI Aayog in close proximity with infrastructure line ministries. This in turn, is a part of ‘Asset Monetisation’ under Union Budget 2021-22.
“The projects are expected to be implemented over the next 2-3 years,” according to the NMP document prepared by Niti Aayog and released by Finance Minister Nirmala Sitharaman on Monday.

“Looking at the future prospects considering the revenue of Rs 6 lakh crore, the amount represents only 14 per cent of the proposed spending for the centre under National Infrastructure Pipeline (NIP), which totals to 43 lakh crore. This value is directly chained with 12-line ministries and 20 plus asset classes,” Deepak Talwar was quoted as saying.

The sectors being catered under NMP are as follows:

l Road: This asset valued at Rs 1.60 lakh crore will be monetised from the FY22-FY25. And the monetary benefit from it will be used by the Road Transport and Highways Ministry and National Highways Authority of India, explains Talwar. In total, 26,700km would fall under this project, which is 22 per cent of the national highways. Niti Aayog CEO Amitabh Kant, said the proposed models of road assets monetisation would be Toll Operate Transfer (ToT) and Infrastructure Investment Trust (InvIT).
l Railways: Monetised under this category are assets including stations, tracks, passenger trains and Konkan Railway. The total benefit is estimated at Rs 1.52 lakh crore over the next four years from this segment.

l Airports: A total of 25 AAI-controlled airports, including Varanasi, Chennai, Nagpur and Bhubaneshwar would be monetised until FY25. The forecast suggests returns worth Rs 20,782 crore from this project.

l Power Transmission: Looking at this sector, Rs 45,200 crore would be collected by monetising the asset. Market analyst Talwar proclaims that transmission assets which aggregate to 28,608 circuit (ckt) kms, might generate less revenue if the transmission charges increase, and if asset availability comes up as an additional factor.

l Coal Mining: A total of 160 coal mining assets have been recognized for this task. And the estimated benefit from it comes up at Rs. 28,747 crore. This includes 17 projects on mine developer and operator (MDO) model, with 35 identified first-mile connectivity projects for building coal silos, operationalisation of four abandoned projects and commercial auction of mines.

Telecom: This asset under monetisation will provide more 35,100 crore worth of benefit. Telecom sector is likely to see 2.86 lakh km of optical fibre assets distributed by BBNL and BSNL under rural broadband project Bharatnet.

l Shipping: Implemented by Ministry of Ports, Shipping and Waterways, the total surplus stands at more than Rs 12,828 crore over the next four years. As per the plan, assets are distributed across 9 to 12 major ports, while 31 projects have been shortlisted for private sector’s involvement to upgrade level of operations.

l Warehouse: As Deepak Talwar explains, the centre plans to monetise warehousing assets, which are state-owned firms: Food Corporation of India (FCI) and Central Warehousing Corporation (CWC). The total revenue generation from this activity is estimated at Rs 28,900 crore.

l Hotel and Realty : This arena under NMP is expected to see housing colonies being privatised until 2025. The sector will see real estate of national capital and eight ITDC hotels being covered under the program. The expected benefits stands at Rs 15,000 crore. “Ministry of Housing & Urban Affairs (MoHUA) owns and manages land through the Land and Development Office (L&DO),” Niti Aayog said in the report.

Now, as the government plans to earn huge swaths of revenue from its program, some stocks might also get an uplift. “This is especially with government-owned companies such as Power Grid, NTPC, NHPC, NLC, GAIL, IOC and HCPL,” stated Deepak Talwar. He also added that this does not mean challenges to the program do not persist. “The list of problems for NMP could be the absence of viable revenue streams across assets, utility in case of gas and petroleum pipeline networks, dispute resolution mechanism, taxes in power sector and lack of guile among investors in national highways below four lanes.”

The government on their part has tried to cover these issues, yet only the execution of the plan would reveal the complete story. India being a developing nation has more grass root issues, and to maintain hierarchy for a project of this magnitude would also be a huge ask. Meanwhile, up until now, the nation has seen privatisation, but only at a rate much slower than this, and if pushing things might generate more profit, it might certainly create more turbulence in the time to come.

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