Asset monetization is imperative to achieve the goal of $5 trillion economy and fund India’s massive infrastructure needs. In the light of above statement, critically discuss the need of national monetization pipeline. Also discuss the issues that need to be addressed for its success.

Government of India has announced National monetization pipeline for asset monetization. Asset monetization refers to deriving value from public assets through means such as leasing (TOT model), selling dysfunctional assets, PPP investments, etc.

Need for asset monetization in India:

  • Harnessing the potential of public infrastructure lying idle, e.g. less-used airports, roads, etc.
  • Financing our massive infrastructure needs for socio-economic development.
  • Promote the private sector, as well as, ease of doing business, through access to infrastructure at affordable prices.
  • Balanced regional development through assets in backward, remote areas.
  • Creation of new, efficient assets, such as minor airports in India (Private owned, perform better).

In above context, India launched the national monetization pipeline, announced in budget of 2021-22.

Features of national monetization pipeline:

  • Around 6 lakh crore indicative value for 2022-25.
  • Monetization of rights, not ownership.
  • Brownfield de-risked assets, core assets.

Challenges in implementation:

  • Valuation of assets has to be transparent and based on detailed analysis.
  • Attracting potential investors for assets is a challenge due to negative sentiment, e.g. disinvestment bids of Air India saw low-key response.
  • Low financial viability of many public assets, such as power sector infrastructure.
  • Poor record in contract enforcement and dispute resolution, e.g. Cairn India and Vodafone cases.
  • Asset specific challenges – Power sector (regulated tariffs), National highways (less than 4-lane).

Way forward:

  • Deepen bond markets.
  • Quality bench marking of assets.
  • Policy certainty & robust dispute resolution mechanism.
  • Easy credit flow for monetization.

Asset monetization can help realize our target of $5 trillion economy by 2025 and finance our massive infrastructure needs.

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