ASSET MONETIZATION

 National Monetization Pipeline NMP announced in the Central budget 2021-22were further developed by NITI Aayog and recently launched it.The strategic objective of asset monetization policy is to unlock the value of investment in public sector assets by utilising private sector capital and efficiencies which can thereafter be leverage for augmentation/green field infrastructure location.Asset monetization entails a limited period license/lease of an asset owned by a Govt or public authority, to a private authority for an upfront or periodic consideration by a well defined concession or contractual framework.Asset monetization being linked with infrastructure creation NMP has been planned to coterminous with remaining 4 year period of National Infrastructure Pipe line(NIP)

     NMP is estimated to fetch rupees 6 lakhs crore to the Govt from private sector for the next 4 years period, through leasing of brown field assets-which are assets already operational that may be leased out to an investor.Assets offered for monetization include- roads, power transmission, power generation, Airport,ports, telecom towers,optical fibre cable, railway station- track, national gas pipeline, petroleum products pipeline, warehouse and sports stadium.

    NMP outlined mainly two methods of implementing asset monetization- public private partnership and structural financing particularly by tapping  stock market.NITI Aayog emphasised the importance of expanding investor base and scale of monetization instruments like infrastructure investment trusts (INIVts) and real estate investment trusts (REITS). Union Budget enabled INIVts and REIvts to borrow money from foreign portfolio investors, and issue debt Security which are also expected to be endorsed by Financial stability development council (FSDC).Inivits are mutual fund like vehicle in which investors can subscribe to units that give dividends.Invits offer a portfolio of assets so investors get the benefits of diversification.In any case Monetization through investment trusts are likely to prove less of a problem than under private public partnership model.For instance PPP projects in the past failed to repay bank loans resulting in non performing assets.

    The success of monetization depends on whether the Government gets a fair value for its assets and the private player get its return on investment.Accordingly the economy benefits from increase in efficiency and optimum utilisation of assets.The cost of capital for a private player is higher than for a public authority.The higher cost of capital for a private player may offset the benefit of any reduction in operating costs.However benefits are likely to be higher where under utilised assets are monetised.Another problem is the difficulty involved in the evaluation of a long term period of lease/contact.A public authority has inherent advantage of low cost of funding.Hence it is more ideal to the public authority to develop infrastructure and monetise them.With regard to the problem of cronisism in the selection of private players,  make the bidding conditions trànsparent so that the number of people eligible to bid are not a small pre determined set.  However depending upon the capital intensity of the project some people may not be able to bid.

  It may be noted here that the Government as a part of a multilayer institutional mechanism for overall implementation and monitoring of asset monetization program has constituted Empowered Core Group of Secretaries on asset monetization (CGAM) chaired by cabinet secretary.It is all the more desirable to have transparency in their working on asset monetization and also nominate professional experts to the core group so as to minimise stumbling blocks in the way ahead.

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