The National Monetisation Pipeline (NMP) has been introduced by the central government as a part of the 'Asset Monetisation' mandate of the Union Budget 2021-22. Under this, the central government plans on leasing out its brownfield assets to private and global companies for long-term periods of 25 to 30 years. The intent is to unlock value in underutilised brownfield assets of the government and pump the raised money into building new infrastructure projects. Through the NMP, the government aims to create a cycle of 'develop, commission, monetise and invest'.

NMP was prepared by NITI Aayog in consultation with ministries in the infrastructure segment. The government will be monetising a host of assets, the top five sectors by value being roads 27%, railways 25%, power 15%, oil and gas pipelines 8% and telecom 6% (Niti Aayog, 2021). The money acquired from NMP is intended to be directed towards the National Infrastructure Pipeline (NIP), another ambitious programme envisaging infrastructure investment worth ₹ 111 lakh crores by FY 2025.

Sector-wise Monetisation Pipeline over FY 2022-25

Source: Niti Aayog, 2021

The government envisions raising ₹ 6 lakh crores through the pipeline over a period of four years, up to FY 2025. It is maintained that no assets will be sold under NMP and that the government will remain in ownership of all leased assets. The government has stressed this distinction of NMP from privatisation as NMP is only a case of 'asset recycling' and not an outright sale.

What are the risks entailed in the NMP?

NMP brings with it the risk of the formation of monopolies or oligarchies, i.e. a market structure vesting high concentration of power in very few players to influence the market. For example, consider the telecom sector. In the current scenario, there are only three major players left in the market — Bharti Airtel, Vodafone Idea and Reliance Jio. Leasing out fibre cables and signal towers to any one of these players would imply bolstering the formation of a monopoly in this sector. Similarly, there are very few players in the power sector or in ports and airports.

The idea behind moving towards a more capitalist model of the economy is to facilitate more competition in the market — higher productivity because of a greater number of competitors. NMP may prove to be counterproductive by furthering the interests of only certain firms. Consequently, this will lead to the formation of monopolies due to which prices for consumers will rise and avenues for employment and wages and salaries of workers will fall.

Secondly, leasing out core infrastructure assets poses a serious threat to the job security of employees working in the public sector units (PSUs) that own these assets. As private sector firms attempt to cut down costs and make greater use of technology, these PSU employees will likely be removed from their posts. Unemployment remains a huge concern already with few new job opportunities being created, and on top of that, the government does not have any plan in place to protect the jobs of these people or provide alternative employment opportunities. The rights of employees and workers will further be flouted in the privatised setup. 

Leasing out assets on a long-term basis is a bad deal for the government, as well as for the tax-payers. The wear and tear caused by the tenants will be greater because they would have no vested interest in the fundamentals of the assets. When the asset is returned at the end of 25-30 years when the lease expires, it would be deprived of all its value due to depreciation from overuse. Additionally, concerns around the adverse impact of this transfer on the environment remain.

NMP has a potential projected value of ₹ 6 lakh crores being raised through it. This quoted figure, in absolute terms, may seem to be a huge sum. But the true amount being gained for use is, in fact, only the difference between the amount received on leasing the asset under NMP and the revenue which the leased asset previously generated. Firstly, the amount that will actually be raised will be much lower than ₹ 6 lakh crores because of the timing at which the monetisation is taking place as the economy has not yet recovered from the slowdown caused by COVID-19. And secondly, the amount that will be available for use, the aforementioned difference amount, would be too small to compensate for what is being given away for such a long period.

What is the way ahead?

Ideally, the government must make PSUs run efficiently and competitively. PSUs work not only for providing services and generating income but more importantly for the larger public welfare. Giving away public sector assets to the private sector cannot and should not be a solution every time an economy like India's runs into inefficiency. 

Instead of the current model of NMP, it is better to sell the assets at their highest attainable value than to lease them for a long period because such a long-term lease is effectively a sale at the price of a lease. This makes the offer more lucrative for business firms without a proportionate gain to the government.

If at all NMP is to stay, then before its implementation, there must be adequate discussion with the associated sensitive stakeholders such as employees and trade unions. Provisions must be made for ensuring continued job security for employees of PSUs whose assets are being leased. A framework for restricting formation of monopolies and oligarchies must also be incorporated as antitrust laws in India are still very weak.

In the current state, the NMP move will ultimately benefit big business organisations more than it will help the government or the public at large. While moving towards a more competitive capitalist economy may facilitate higher efficiency, the distressed labour-oriented economy of India is not yet equipped for the implementation of the NMP.

Anjali Bhardwaj is a second-year student of Economics at Indraprastha College for Women.

References

1.  Nagaraj, R. (2021, August 31). A monetisation move that doesn't tick most boxes. The Hindu. https://www.thehindu.com/opinion/lead/a-monetisation-move-that-doesnt-tick-most-boxes/article36191449.ece

2.  Chidambaram, P. (2021, August 30). The grand closing down sale. The Indian Express. https://indianexpress.com/article/opinion/columns/narendra-modi-national-monetisation-pipeline-assets-railway-lines-roadways-7474693/

3.  Mehta, V. (2021, September 7). National monetisation pipeline betrays narrow outlook. The Indian Express. https://indianexpress.com/article/opinion/columns/national-monetisation-pipeline-nirmala-sitharaman-private-public-investment-7490917/

4.    Venu, M.K. (2021, August 29). Modi's Asset Monetisation Bonanza Must Avoid The Ownership Concentration Trap. The Wire. https://thewire.in/economy/narendra-modi-asset-monetisation-ownership-concentration

5.  Niti Aayog. (2021). National Monetisation Pipeline (NMP). The Government of India's website. https://www.india.gov.in/spotlight/national-monetisation-pipeline-nmp

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