NMP 2.0: What is asset monetization, through which the government will raise Rs 16.72 lakh crore in 5 years? Which sectors will be directly affected – Market

Why does the government need money?

There is a need for huge expenditure on infrastructure in the country, such as new roads, rail projects, green energy, logistics parks, digital networks, money is needed for everything. The government does not want to do this work by taking a new loan every time. In such a situation, she wants to withdraw money from old and current assets and invest it in a new project. This is called ‘recycling of capital’. That is, take money out of the old property and invest it in new development.

Where will ₹16.72 lakh crore come from?

Under NMP 2.0, it is estimated that there is a monetization potential of up to ₹16.72 lakh crore in five years. This will include assets of central ministries and public undertakings. This may include assets such as roads, railways, power transmission, gas pipelines, telecom towers, coal mines, ports, airports, warehouses and real estate. Private investment will also be part of this process.

Which sectors will be directly affected?

The biggest impact will be seen on the infrastructure sector. Participation of private companies will increase in highway projects through Toll-Operate-Transfer (TOT) model. Freight corridor and station re-development in railways may gain momentum. Transmission line and gas pipeline operations in the power sector can be given to private companies. The airport and port sector may also expand on the lease model as before. Better utilization of government land and properties in real estate and warehousing sector can strengthen the logistics network. This will also benefit the industrial and manufacturing sector.

When and in what phase will all the work be completed?

History of NMP 1.0

The National Monetization Pipeline (NMP) was first introduced in August 2021, when the government launched NMP 1.0. At that time the target was to raise about ₹ 6 lakh crore between financial years 2022 to 2025. The objective was clear to withdraw capital from government infrastructure assets and invest in new projects. Under NMP 1.0, it was planned to give existing and revenue generating assets like roads, railways, power transmission, gas pipelines, airports, ports, warehouses and telecom towers to private companies on lease model. This specifically included the assets of National Highway Authority of India (NHAI), Power Grid, Gas Authority of India (GAIL), Airport Authority of India (AAI) and Indian Railways.

NMP 1.0 was important also because it was a major change in the government’s strategy. Earlier the government used to borrow heavily for new projects, but in this model the emphasis has been on ‘asset recycling’. That is, money should be withdrawn from already ready and earning assets and invested in new greenfield projects. Through this, an attempt was made to reduce pressure on fiscal deficit and promote private investment.

Will common people be affected?

Many people fear that fees or tolls will increase with the entry of private companies. But the government usually decides the tariff structure and regulations in the contract. The positive aspect is that private companies can make services more efficient by bringing in better management and technology. If implemented properly, better roads, faster logistics and lower cost supply chains will benefit both the general public and industry.

What does it mean for investors?

From the stock market point of view, this step can be a big opportunity for infrastructure, power, logistics and construction companies. In the long term, it can increase economic activity, which will support GDP growth. However, the challenge will be to ensure correct valuation of assets and maintain transparency. If the process is clean and competitive, it can prove beneficial for both the government and investors.