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DAILY NEWS ANALYSIS

  • 10 December, 2021

  • 12 Min Read

National Monetization Pipeline

  • In the Union Budget 2021-22, the Finance Minister had announced the National Monetization Pipeline.
  • The National Monetisation Pipeline comprises a four-year pipeline of the Central Government's brownfield infrastructure assets.
  • The Union Finance Minister announced launch of a “National Monetization Pipeline” of potential brownfield infrastructure assets stating that Monetizing operating public infrastructure assets is a very important financing option for new infrastructure construction.
  • As part of National Monetization pipeline, assets created by PSUs such as NHAI, PGCIL, Railways etc. would be sold and money raised would then be used for the creation of new infrastructure assets.
  • Presently, we have around 2 publically listed InVITs ( IRB InVIT and India Grid) both of which have been sponsored by the private companies. Now, the PGCIL has become the first PSU in India to sponsor its own InVIT to monetize its assets.
  • The Minister informed that an Asset Monetization dashboard will also be created for tracking the progress and to provide visibility to investors.
  • The National Monetisation Pipeline will serve as a medium-term roadmap for the Asset Monetisation initiative of Centre, besides providing visibility to the investors.

Some important measures in the direction of monetisation are as follows:

  • National Highways Authority of India and PGCIL each have sponsored one InvIT that will attract international and domestic institutional investors. Five operational roads with an estimated enterprise value of Rs.5,000 crore are being transferred to the NHAIInvIT. Similarily, transmission assets of a value of Rs. 7,000 crore will be transferred to the PGCILInvIT.
  • Railways will monetize Dedicated Freight Corridor assets for operations and maintenance, after commissioning.
  • The next lot of Airports will be monetised for operations and management concession.
  • Other core infrastructure assets that will be rolled out under the Asset Monetization Programme are:
  1. NHAI Operational Toll Roads
  2. Transmission Assets of PGCIL
  3. Oil and Gas Pipelines of GAIL, IOCL and HPCL
  4. AAI Airports in Tier II and III cities,
  5. Other Railway Infrastructure Assets
  6. Warehousing Assets of CPSEs such as Central Warehousing Corporation and NAFED among others and
  7. Sports Stadiums.

Infrastructure Investment Trust (InvITs)

  • Infrastructure and real estate are the two most critical sectors in any developing economy. A well-developed infrastructural set-up propels the overall development of a country. It also facilitates a steady inflow of private and foreign investments, and thereby augments the capital base available for the growth of key sectors in an economy, as well as its own growth, in a sustained manner.
  • Given the importance of these two sectors in the country, and the paucity of public funds available to stimulate their growth, it is imperative that additional channels of financing are put in place.
  • An Infrastructure Investment Trust (InvITs) is Collective Investment Scheme similar to a mutual fund, which enables direct investment of money from individual and institutional investors in infrastructure projects to earn a small portion of the income as return.
  • The InvIT is designed as a tiered structure with Sponsor setting up the InvIT which in turn invests into the eligible infrastructure projects either directly or via special purpose vehicles (SPVs).
  • The InvITs are regulated by the SEBI (Infrastructure Investment Trusts) Regulations, 2014.

Source: PIB


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