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About seven decades back, assets like roads, railways, ports, power, oil & gas pipelines, etc. were placed under the control of state-owned public enterprises (PSEs).

However, In the years since, the PSEs have disappointed and failed to deliver on their financial and social objectives.

The National Monetisation Pipeline (NMP) launched in August 2021, is designed to unlock the value of investments in such brownfield public sector assets by tapping institutional and long-term capital.

National Monetisation Pipeline (NMP)

• The National Monetisation Pipeline (NMP) envisages an aggregate monetization potential of ₹6-lakh crore through the leasing of core assets of the Central government in sectors such as roads, railways, power, oil and gas pipelines, telecom, civil aviation, etc., over a four-year period (FY 2022-25).

• Need for NMP – Failure of Public Sector Enterprises:
  • Cost Overruns: In some cases, project completion time is exceeded, leading to the elevated projcostscost.
  • Overcapitalization: The input-output ratio is not optimum in a majority of government infrastructure projects leading to their overcapitalization.
  • Reluctance to implement labor reforms, 
  • Lack of inter-ministerial/departmental coordination,
  • Poor decision-making, 
  • Ineffective governance and excessive government control
• Significance of National Monetisation Pipeline:
  • Boost Economy: It is the first-of-its-kind initiative that will boost the economy, generate better employment opportunities and drive competitiveness.
  • Utilizing Underutilised Public Assets: The NMP advocates unlocking idle capital from non-strategic underperforming government-owned assets and reinvesting the funds received, into new infrastructure projects.

Challenges Associated to NMP

• Issue of Taxpayers’ Money: The taxpayers have already paid for these public assets and, so, why should they pay again to a private party to use them.
• Cycle of Creating and Monetising Assets: Generate a vicious cycle of creating new assets and then monetizing the same when they become liabilities.
• Asset-specific Challenges:

• Low Level of capacity utilization in gas and petroleum pipeline networks, 
• Regulated tariffs in power sector assets,
• Low interest among investors and 
• Multiple stakeholders.

• Monopolisation: A significant criticism of the NMP is that the transfer would end up creating monopolies, leading to a rise in price because monopolization is inevitable in the case of highways and railway lines.

Way Forward

• Strengthening Public Enterprises: As India needs to invest about $1.5 trillion on infrastructure development in order to aspire to become a $5 trillion economy by the year 2024-25, public enterprises should be in focus.

• In order to do it,corporate governance structure should be revamped in order to enhance operational autonomy.

• Alternative Dispute-Resolution Mechanism: Efficient and effective dispute resolution mechanisms will naturally and automatically accrue to the design and execution.
• Multi-Stakeholder Approach: The success of the infrastructure expansion plan would depend on other stakeholders playing their due role, this includes State governments and their public sector enterprises and the private sector.
  • High-Powered Intergovernmental Group to re-examine the fiscal responsibility legislation of the Centre and States should be set-up as recommended by 15^th Finance Commission.
• Dealing with Cronyism: People eligible to bid should not be a small in number or predetermined set, and to do this sufficient participation should be ensured by the government.
• Addressing Systemic Problems and Generating Social Values: Until and unless the systemic problems are addressed, the private sector will find it difficult to harness the full value of the public assets.
  • Private-public investment structures make sense, but they must be modeled to also generate social value. 
  • Sustainable development should also be under consideration.

Conclusion:

• Streamlining operational modalities, encouraging investor participation, and facilitating commercial efficiency’ could ensure ‘efficient and effective’ outcomes from the monetization drive.
• More  out-of-the-box policy initiatives are needed to rule out public asset monetization schemes such as the NMP in the future.