Thursday, Aug 18, 2022

Asset Monetization Expected To Be A Key Theme Of Budget 2022-23

One of the themes of the Union Budget 2022-23 is expected to be asset monetization and fixing of targets for the same.

Finance minister Nirmala Sitharaman had announced in August a Rs 6-lakh crore National Monetisation Pipeline (NMP) that would look to unlock value in infrastructure assets across sectors ranging from power to road and railways. She had also said that asset monetisation would not involve the selling of land and would entail monetising brownfield assets. Projects have been identified across sectors, with roads, railways and power being the top segments. 

In the upcoming budget, the government is looking to fix targets for achieving the monetization programme, as it does for tax and divestment targets. 

“The target has not been finalized yet. But we are planning to lay down the roadmap for the same. Just like your divestment and tax targets. There would now be annual monetisation targets too,” a government official said.  

Last year’s budget had identified the monetisation of operating public infrastructure assets as one of the key means for sustainable infrastructure financing. 

For this, the Budget had been provided for the preparation of a National Monetisation Pipeline of potential brownfield infrastructure assets. NITI Aayog in consultation with infra line ministries has prepared the report on NMP. The aggregate asset pipeline under NMP over the four-year period is indicatively valued at Rs 6 lakh crore. The estimated value corresponds to 14 per cent of the proposed outlay for the Centre under the NMP (Rs 43 lakh crore). 

The government had earlier tried to monetize idle brownfield public assets to use the revenue generated from it for funding new projects. In July 2020, Indian Railways formally began inviting private players to run 150 trains. But when the bid opened, there were no bidders for nine clusters and three clusters found only two bidders. Railways’ own company IRCTC was the only serious bidder in the three clusters that found bidders, thus nullifying the primary objective to unlock private capital.  

Another criticism of asset monetization programme has been that public assets from sectors such as railways, power, airports, roads, gas pipelines, ports, telecom, and mining, built from taxpayers’ money in the last 70 years, are being made available through long-term leases to private players for 25-50 years. 

While in privatization, stake sale in state-owned companies brings in money to government coffers, the Centre would not get any proceeds from asset monetization. The public sector undertakings (PSUs) that own these assets would get the money. The government can get a part of the proceeds through share buybacks or dividend payout from these undertakings. For unlisted PSUs, the government is entitled to receive the entire dividend payout and share buyback amount.  

“This entire pipeline is talking about brownfield projects where investments have already been made, where there is a completed asset which is either languishing or it is not fully monetised or is under-utilised. So by bringing in private participation in this, you will be able to monetise it better and ensure further investment in infrastructure building,” Sitharaman had said during the launch of NMP.