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Govt to unlock brownfield asset potential via monetisation pipeline: Report

NMP contains assets and asset classes proposed to be monetised. It aims to monetise 13 classes of core assets of estimated value of  ₹6 trillion over FY22-FY25. Photo: Ramesh Pathania/MintPremium
NMP contains assets and asset classes proposed to be monetised. It aims to monetise 13 classes of core assets of estimated value of 6 trillion over FY22-FY25. Photo: Ramesh Pathania/Mint

  • India Ratings said that National Monetisation Pipeline will reinforce government’s focus on infrastructure spending and augment capital creation for new infrastructure development.

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Mumbai: The National Monetisation Pipeline (NMP) will unlock capital through the monetisation of de-risked brownfield assets, India Ratings and Research (Ind-Ra) said on Friday.

Over the past decade, a sizeable inventory of infrastructure assets has been created which can now be leveraged for unlocking the value of private sector investments in brownfield assets. This will generate cash inflows required to create greenfield infrastructure assets in the form of National Infrastructure Pipeline.

Ind-Ra said that NMP will reinforce government’s focus on infrastructure spending and augment capital creation for new infrastructure development.

The government of India announced NMP on 23 August 2021 in line with the roadmap introduced in the Union Budget 2021-22 which is further developed in consultation with Niti Aayog. The government through NMP intends to create a medium-term road map for line ministries and agencies for providing medium-term visibility to investors and to bring better efficiency in public asset management.

NMP contains assets and asset classes proposed to be monetised. It aims to monetise 13 classes of core assets of estimated value of 6 trillion over FY22-FY25. The core assets include – roads, railways, power transmission, power generation, telecom, warehousing, mining, national gas pipelines, product pipelines/others, aviation, urban real estate, ports and stadiums. For the purpose of monetisation, revenue-generating core assets or assets which have reached significant stage of completion are considered.

In its analysis of the monetisation programme, Ind-Ra said for the successful implementation of asset monetisation pipeline, brownfield de-risked assets should be monetised to generate stable revenue streams. Moreover, selection of private partners should be through a transparent mechanism and utilisation of the proceeds received towards well-defined uses such as new infrastructure creation.

In its analysis, the ratings agency said that the government’s strong focus on road, railways, power assets is on account of the available sizeable brownfield inventory, healthy budgetary allocation to this segment and tested monetisation vehicles.

Ind-Ra also said that if NMP is implemented for these segments as envisaged, this sector could provide huge potential to unlock growth capital.

Fair valuation of core assets could pose challenge to the government along with challenges related to the transfer of public assets to private players since the government would transfer revenue rights to private players for the assets developed from tax payer’s money.

Ind-Ra said that although NMP is comprehensive in terms of covering the assets classes & types of assets, timelines for monetisation, methods of valuation, modes of valuation and modes of monetisation, the key challenge also lies is towards execution where clarity is pending regarding the usage of these funds.

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