Opinion | Monetisation Through NMP Promotes Infrastructure Development And Attracts Investment
To maximise benefits, the Centre should link budgetary support to the asset monetisation performance of the states
Prime Minister Narendra Modi is a visionary leader who is striving to make India a developed country after completing 100 years of Independence through innovative governance and strategic planning. Under his leadership, the government has initiated several important reforms and is preparing a comprehensive roadmap to lead the country towards unprecedented growth and development. This demonstrates the PM’s ability to think beyond the present. This foresight is evident from the 100-day agenda set for the next government in the last days of the previous NDA government, which reflects Modi’s confidence and his strategic planning.
According to media reports, this forward-thinking approach is also being reflected in the National Asset Monetisation programme as the Centre has started discussions on a second monetisation cycle starting from FY2026 to raise Rs 10 trillion over the next five-years. However, there are still about four months left in the first four-year cycle. Therefore, it is important to evaluate the first cycle before moving to the next phase, so that an effective plan can be made for the next cycle.
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It is noteworthy that the finance minister had unveiled the monetisation programme in budget-2021. Accordingly NITI Aayog had developed a National Monetisation Pipeline (NMP) in consultation with infrastructure ministries and it was launched on August 23, 2021. The policy focuses on recycling capital, from unlocking the value of government-owned assets to fund infrastructure projects.
Fostering Sustainable Development
Infrastructure expansion is key to India’s vision 2047, which aims to achieve a $40 trillion economy and developed nation status by the end of its Amrit Kaal. India will need to strengthen its growth enablers to achieve this potential growth. To this end, investment in infrastructure would be a clear priority as it has multiplier effects. Strategic infrastructure reduces frictional costs, amplifies competitiveness across all sectors, boosts domestic consumption of basic materials like steel, cement etc., unleashes employment opportunities, thereby accelerating sustainable growth.
Acknowledging the importance of building roads, ports, railways, energy etc., the government launched a National Infrastructure Pipeline (NIP) in 2019. It outlines a comprehensive project list to upgrade infrastructure, which will require an investment of Rs 111.4 trillion between 2019-20 to 2024-25. The government has created a conducive environment by promoting private investment in infrastructure. In the same line, it is also being supported by the NMP as a strategic initiative to monetise underutilised public assets and redirect capital to develop new infrastructure for its citizens.
Current Fiscal Outlook
The asset monetisation target for the current financial year which was initially Rs 1.67 trillion, has now been raised by NITI Aayog by Rs 0.23 trillion from the previous target to Rs 1.90 trillion. Of the target of Rs 1.90 trillion, the Centre hopes to get Rs 0.54 trillion from monetisation of its vast network of highways. Coal block monetisation is likely to fetch an impressive Rs 0.55 trillion and monetisation of railways, power and petroleum and natural gas assets aims to raise around Rs 0.46 trillion.
Destination, Journey, and Detours
The NMP outlines a medium-term blueprint to unlock value from public assets and finance infrastructure. The total monetisation NMP for the four-year period from FY2022 to FY2025 through leasing out the core assets of the Central government to the private players to support NIP is estimated to be Rs 5.98 trillion.
Since the FY25 target has been revised upwards, the total target for the first four-year cycle has reached Rs 6.21 trillion. In a remarkable achievement, India has monetized assets worth Rs 3.85 trillion in the last three years from FY 2021-22 to FY 2023-24. This is about 88.92 per cent of its ambitious target of Rs 4.33 trillion. The poor performance of Railways resulted in a loss of 11.08 per cent.
However, year-wise monetisation yield reflects varying performance over a three-year period. In FY2022, the actual yield was 10.23 per cent higher than the target, resulting in an impressive performance of 110.23 per cent. Despite this, this exceptional performance was short-lived, as unfavourable conditions caused the yield to fall to 80.98 per cent in FY2023, which was 19.02 per cent below the target. The shortfall occurred because some key ministries, including power, telecom, railways and road transport, failed to meet their targets.
Fortunately, performance improved slightly in FY2024, with the yield increasing to 86.67 per cent, though still 13.33 per cent short of the target, which was the highest in all four years. There are seven ministries which have crossed 70 per cent target achievement during the fiscal. This includes road, transport, coal, power, mines, petroleum and natural gas urban and shipping, whose combined crops were about Rs 1.40 trillion.
Identifying Roadblocks and Ways to beat
The FY25 target has been revised upwards to achieve the overall target of Rs 6 trillion under NMP. Yet, despite the revised target for the current fiscal year, India’s asset monetization efforts are likely to fall short by Rs 0.20-0.25 trillion. India’s asset monetisation strategy, in the words of the World Bank, seeks to unlock private sector investment for new infrastructure development, guided by the principle of “creation through monetisation".
Therefore, a reduction in NMP targets could weaken the government’s ambitious NIP, potentially delaying critical infrastructure projects and hampering economic growth. The original NMP targets eluded most ministries, however, the revised targets were met, except for the Railways, telecom, warehouse, aviation and sports infrastructure.
The Railways, which was expected to contribute about 25 per cent to monetisation crops as it had 25.59 per cent weightage in the original NMP target, has struggled to offload key assets such as stations, track overhead equipment, and passenger train operations. It has realised only 14 per cent of original target of Rs 1.59 trillion and 31 per cent of revised downgraded NMP target of Rs 0.68 trillion. Due to its poor performance, NITI Aayog has already asked the Railways to focus on commercial development of railway land, Business Standard reported.
In conclusion, it can be said that monetisation through NMP promotes infrastructure development and attracts investment. Therefore, to maximise benefits, the Centre should link budgetary support to the asset monetisation performance of the states. To make it more effective, the government should streamlet the process, involve stakeholders, make operational reforms, leverage technology and encourage competition.
The writer teaches at Institute of Technology and Science, Ghaziabad. His ‘X’ handle is @meetdrvinay. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect News18’s views.
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