National monetization pipeline: New infrastructure for old is solid

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The centre’s move to unlock the investment value for large public projects via the National Monetization Pipeline (NMP) makes perfect sense. It creates a favorable environment for long-term institutional investment in infrastructure and the efficiency of the private sector in managing such assets. The plan is to raise ₹ 6 lakh crore through leasing and monetization of mature assets in sectors such as highways, railways, power lines and gas pipelines over the next four years through fiscal year 2025. It would make sense to move ahead to take advantage of the extremely low interest rates in mature markets and mobilize funds for greenfield investments that would accelerate the post-pandemic recovery.

Note that there is no burglary sale or privatization. The monetization of assets provides for a temporary license / leasing of an asset owned by the state or a public authority for an advance or regular concession to a private sector company, whereby the concessionaire is decided by means of a transparent tendering process. The NMP would involve around 12 government departments and 20 asset classes, including additional sectors such as aviation, shipping, warehousing, urban real estate, mining facilities and petroleum product pipelines. It is also noteworthy that the center aims to provide state governments with clear incentives to monetize public assets. When a state monetizes an asset, 33% of the amount raised is said to be provided by the center as an additional benefit. Up to 26 states have already set up node mechanisms for this purpose.

Long-term investors such as pension funds and insurance companies would appreciate the opportunity to invest in mature infrastructure assets minus construction and other risks. With solid operation, maintenance and proactivity on the part of the plant operator, there can be large increases in sales. Operating such assets is a specialized activity. Experienced managers could perhaps found operating companies that are employed by investors without their own operational know-how.

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