Asset Monetisation

  • March 10, 2022
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Asset Monetisation

Subject: Economy

Section: Fiscal Policy

Context: Cabinet nod for new firm to monetise land assets

Concept:

National Land Monetisation Corporation to undertake monetisation of non-core assets such as surplus land of Central Public Sector Enterprises and government agencies. The new company will have an initial authorised share capital of ₹5,000 crore and paid-up share capital of ₹150 crore.

The Board of Directors of NLMC will comprise senior Central Government officers and eminent experts to enable professional operations and management of the company. The chairman, non-government directors of the NLMC will be appointed through a merit-based selection process.

Functions

  • Government assets will be transferred to NLMC to hold, manage and monetise.
  • Advise and support other government entities, including CPSEs, in identifying their surplus non-core assets and monetising them in a professional and efficient manner to generate maximum value realisation.
  • NLMC will undertake surplus land asset monetisation as an agency function.
  • NLMC will act as a repository of best practices in land monetisation, assist and provide technical advice to the government in implementation of the asset monetisation programme.

Importance

  • Revenue to government
  • Enable productive utilisation of under-utilised assets
  • Encourage private investment and participation in the economic development
  • Boost local economy
  • Employment generation
  • Development of infrastructure

In asset monetisation, the government parts with its assets — such as roads, coal mines — for a specified period of time in exchange for a lump sum payment.

At the end of the period, the assets return to the government. Unlike in privatisation, no sale of government assets is involved.

By monetising assets it has already built, the government can earn revenues to build more infrastructure.

Asset monetisation will happen mainly in three sectors: roads, railways and power.

Other assets to be monetised include: airports, ports, telecom, stadiums and power transmission.

National Monetisation Pipeline (NMP):

It is an ambitious 4 year period ₹6 lakh-crore National Monetisation Pipeline (NMP) that included unlocking value in brownfield projects by involving private firms across infrastructure sectors from passenger trains and railway stations to airports.

As per the plan, private firms can invest in projects for a fixed return using the Infrastructure Investment Trusts (InvIT) route as well as operate and develop the assets for a certain period before transferring them back to the government agency.

Land will not be monetised under the National Monetisation Plan only brownfield assets to be monetised.

The top five sectors by value under the government’s asset monetization programme are roads (27%), railways (25%), power (15%), oil and gas pipelines (8%) and telecom (6%).

While the monetization of core assets is steered by NITI Aayog

Asset monetisation economy