India is on the verge of unlocking significant value from its existing infrastructure through a new initiative called the National Monetisation Pipeline (NMP) 2.0, which has been launched by the government. The government aims to raise ₹16.7 lakh crore by leasing out public assets and reinvesting the proceeds into new infrastructure projects, as part of its National Asset Monetisation Strategy.
NMP 2.0, which was announced by Finance Minister Nirmala Sitharaman, represents the second phase of India’s Asset Monetisation Programme, and could potentially have a long-term economic impact of around ₹40 lakh crore, according to estimates made by NITI Aayog.
What is National Monetization Pipeline 2.0?
The goal of NMP 2.0 is to provide a roadmap for the monetisation of more than 2,000 operational infrastructure assets during the period of 2025 to 2030.
The types of infrastructure included in NMP 2.0 are:
1. National Highways and Logistics Parks
2. Power Transmission Lines and Power Generation Assets
3. Railway Freight Corridors and Railway Stations
4. Airports, Ports, Pipelines
5. Telecom, Mining, Urban Infrastructure
The government does not intend to sell assets (like government services), but rather intends to lease them out to private companies for a specified period of time. Private operators will be responsible for operation and maintenance of the assets; however, ownership will remain with the Government.
Why the government is monetizing infrastructure
The government has been making some sizable investments into developing infrastructure for the last 20 years. Now, many of these are providing ongoing revenues through tolls, user fees and service charges so that the funds that were generated could then be converted into immediate cash through monetisation (based on NMP 2.0) to help build additional, brand new infrastructure (e.g. highways, rail corridors and renewable energy).
Basically, the monetisation cycle is:
Build – Monetize – Reinvest – Build More
Roads, power, railways to lead monetization
Road infrastructure will bring in the most revenue with ₹4.42 lakh crore expected from highways and related assets.
The power industry will come next with around ₹2.76 lakh crore.
Railroads and Port monetization will each collect about ₹2.62 lakh crore and ₹2.63 lakh crore respectively.
Coal, mining, aviation and telecom monetization will bring in additional sums. Thus, the total monetization will be approximately ₹10.8 lakh crore by 2030.
NITI Aayog suggests that if the monetization proceeds are reinvested into new infrastructure, total investment will amount to ₹12.2 lakh crore.
Using standard economic multipliers, these projects will create a GDP impact of potentially ₹40 lakh crore over the next 10 years.
Investing in infrastructure creates jobs, boosts industries such as cement and steel, enhances logistics, and attracts private investment.
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How this could boost India’s economy
India has increased public infrastructure spending over the last 10 years but is trying to control its fiscal deficit.
Monetising an asset provides funds for government use without having to borrow extra funds.
Pension funds and sovereign wealth funds are increasingly investing globally; when they invest in infrastructure assets, they prefer them to be stable.
The memorandum of understanding (MOU) states the new approach being taken by the Government of India’s NMP 2.0 to fund new development activities.
The new approach will combine tax revenue with asset monetisation to fund future growth.
If successfully executed, this plan could accelerate infrastructure investments and help improve the potential for increased productivity in the economy, moving towards India’s long-term goal of becoming a $5 trillion economy.
The overall success of this plan will depend on how well it is executed, the level of investor confidence and the speed at which funds will be reinvested in new projects.
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