“Germany in order to be strong has to be rich” – Bismarck

The same applies absolutely to India. India cannot be a Vishwaguru if it doesn’t have a strong economy.

The Finance Ministry under the able leadership of Nirmalaji came up with grad plan of generating money from un-used or under-used assets called National Monetization Pipeline (NMP) so that Govt can fund another big endeavor called the “GATI SHAKTI YOJANA” or the National Infrastructure Pipeline (NIP).

In this piece we will dicsuss the following aspects:

  1. What is NMP?
  2. What is NIP or Gati Shakti Yojana?
  3. What effect NMP/NIP will have?
  4. The truth in the allegations against NMP and the reason.

First, What is NMP?

In single line, the under the NMP the Central Govt will monetize the brown field assets. “Brown field” means the assets which are already existing. “Green Field” means assets built from scratch.

The NMP will work in the below manner:

  1. Take the case of a Railway station. The Govt may allow through bidding process a company to manage that Railway station. Govt wont invest any money. The company will build all infrastructure(like malls, hotels, movie halls etc.) in the Station. The Company may pay an upfront amount to the Govt or may agree for a revenue sharing model (a certain percentage of the profits earned goes to Govt.) depending on contract.
  2. The Company will hold the asset for a certain period of time (say 10-20-30 years as agreed in contract), after which the asset will come back to the Govt.
  3. Take the case of Railways. Govt will allow private trains to run. The company purchases trains, fixes the fares. And share a percentage of their profits with the Govt.
  4. Take the case of Highways. The Govt may allow Company to build a highway and operate the highway. The Company will collect toll, build hotels etc. and earn money and pay a certain amount in revenue sharing model every year OR may make an upfront amount to Govt. The Company will operate the Highway for say 30 years, after which the Highways goes back to Govt. This model has resulted to a lot of growth in building highways. Govt. uses the money for other purposes.
  5. Same applies to airports. The money earned from Airports is used by AAI to build new airports.

How much money Govt expects from NMP and from where?

The NMP estimates aggregate monetization potential of Rs. 6 lakh crores through core assets of the Central Government, over a four-year period, from FY 2022 to FY 2025. Sector wise estimated breakup is below.

Source: Niti Aayog

Second, what is National Infrastructure Pipeline(NIP):

Prime Minister in his Independence Day speech 2019 had highlighted that ₹100 lakh crore would be invested on infrastructure over the next 5 years. The emphasis would be on ease of living: safe drinking water, access to clean and affordable energy, healthcare for all, modern railway stations, airports, bus terminals and world-class educational institutes. NIP will enable a forward outlook on infrastructure projects which will create jobs, improve ease of living, and provide equitable access to infrastructure for all, thereby making growth more inclusive.

During the fiscals 2020 to 2025, sectors such as Energy (24%), Roads (19%), Urban (16%), and Railways (13%) amount to around 70% of the projected capital expenditure in infrastructure in India. It has outlined plans to invest more than ₹102 lakh crore on infrastructure projects by 2024-25, with the Centre, States and the private sector to share the capital expenditure in a 39:39:22 formula.

Source: TH

Third, What effect NMP will have over the economy?

NMP will have a multiplier effect on economy and result to better governance. How?

  1. NMP will bring in private investments to infrastructure which will result to investment in various sectors which otherwise would have starved due to lack of Govt funds.
  2. Govt’s debt would not grow as the investment would be done by private funding.
  3. The customers will get better service. For e.g. few Indian airports have entered the best 100 airports’ list globally after being given to private operators. Private trains will provide better services to customers. No more stinking toilets in trains.
  4. The funds so earned will be spent for NIP and hence create more infrastructure.
  5. Job creation will accelerate. First, when unused assets will be used, people will get jobs. And when the money earned will be spent on building new infrastructure and still more jibs will be created.
  6. The Govt’s assets will grow, how? In the NMP the assets wont be privatized. At the end of the contract period, the private party needs to return the asset back to Govt.
  7. Not many people speak about this. But by reducing burden of managing assets like say Railway stations, Airports, Ports etc. many Govt officials will get freed up and the Govt can focus on better governance. It is a no-brainer that governance in India is sub-par.

Fourth, The truth in the allegations against NMP and the reason behind the allegations and the pitfalls.

  1. Is Govt going to privatize the assets? The answer is “NO”. The owner is still the Govt. After expiry of the contract period, the private party will give back the asset to Govt.
  2. Who started the policy of Monetization? UPA. In fact, UPA1 Govt pioneered the monetization of Airports and they deserve credit for that.
  3. Then, why is the opposition? It is just to oppose.
  4. The major pitfall I see: lack of private interest. For e.g., not many Companies were interested in running private trains. If same occurs for other sectors Govt. may not achieve its goal.

Hence, considering all the above aspects, the NMP and also the NIP will be game changers for Indian economy. With best infrastructure, India will further industrialize and become richer and stronger.

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