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WHAT IS ASSET MANAGEMENT?

Asset Monetisation

To monetise something means to ‘express it or convert it into the form of currency’. Basically, monetising is ‘to utilise (something of value) as a source of profit,’ or ‘to convert an asset into money or a legal tender.’ For example, a government can monetise the nation’s debt by acquiring debt treasuries, which increases the supply of money. Consequently, the debt is turned into money, or in other words, it is monetised.

Public assets such as roads, airports, railways, power transmission lines, pipelines, shipping terminals, mobile towers and other land and building, financial assets are controlled by departments of central government, respective state governments and public sector units (PSUs). Globally, it is considered that public assets are a crucial resource for all economies.

Asset monetisation explained

Asset monetisation is the process of creating new sources of revenue for the government and its entities by unlocking the economic value of unutilised or underutilised public assets. A public asset can be any property owned by a public body, roads, airports, railways, stations, pipelines, mobile towers, transmission lines, etc., or even land that remains unutilised.

As a concept, asset monetisation implies offering public infrastructure to the institutional investors or private sector through structured mechanisms. Monetisation is different from ‘privatisation’, in fact, it signifies ‘structured partnerships’ with the private sector under certain contractual frameworks.

Asset monetisation has two important motives: Firstly, it unlocks value from the public investment in infrastructure, and secondly, it utilises productivity in the private sector. Asset monetisation aims to tap the private sector investment for new infrastructure creation.

"Asset monetisation does not involve the selling of land, but it is about monetising brownfield assets", said India's Finance Minister Nirmala Sitharaman.

In India, the idea of asset monetisation was first suggested by a committee led by economist Vijay Kelkar in 2012 on the roadmap for fiscal consolidation.

The committee had recommended that the government should start monetisation to raise resources for further development and financing infrastructure needs.

National Monetisation Pipeline

The government of India announced the National Monetisation Pipeline (NMP) worth Rs 6 trillion on August 23 in 2021. This scheme aims to serve as a roadmap for the asset monetisation of several brownfield infrastructure assets across sectors including roads, railways, aviation, power, oil and gas, and warehousing.

NMP is a central portal that could act as a land bank housing information about all assets that have been lined up for utilisation by strategic investors or private sector companies. It will also assess the potential value of unused and underutilised government assets.

The NMP targets to raise Rs 6 trillion through asset monetisation of the central government, over a four-year period, from FY22 to FY25. However, the ownership of the assets will be retained by the Centre. NMP focuses on brownfield assets in which investments have already been made but are underutilised.

The underutilised brownfield assets are in sectors such as roads, railways, airports, mines, and power. This initiative is necessary for bringing in private capital which will be used for infra creation.

According to an official communique, the top five sectors in terms of contribution to NMP are roads (27%) followed by railways (25%), power (15%), oil and gas pipelines (8%), and telecom (6%).

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