Monetisation vs. Privatisation

Monetisation involves outsourcing operating rights over public infrastructure assets, while privatisation refers to selling the assets themselves. The National Monetisation Pipeline (NMP) 2.0 focuses on keeping assets publicly owned but operated by private entities, akin to a Public-Private Partnership (PPP).

National Monetisation Pipeline (NMP) 2.0

The NMP 2.0, initiated in February, targets ₹16.72 trillion for FY 2026-30, which is 2.6 times the earlier NMP 1.0 target of ₹5.95 trillion for FY 2021-25. This approach pivots towards a format where the state manages development and construction risks, while private players handle operational risks.

Challenges with Previous PPP Models

• Earlier PPPs shifted all risks to private developers, leading to aggressive bidding and project failures.
• Major issues: flawed traffic projections, land acquisition delays, and cost overruns.
• This resulted in 43 of 73 highway PPPs being terminated and contributed to a significant ₹18 trillion non-performing asset problem.

Hybrid Annuity Model (HAM)

The Hybrid Annuity Model introduced in the mid-2010s, balanced risk by having the government assume land and revenue risks, while private players focused on building and operating the assets.

NMP 1.0 Achievements

• Set a target of about ₹6 trillion for brownfield monetisation.
• Deployed models like Toll-Operate-Transfer (ToT), Infrastructure Investment Trusts (InvITs), and securitisation.
• Achieved 89% of the target, with roads and coal performing well but railways and aviation lagging.

NMP 2.0 Developments

• The National Highways Authority of India (NHAI) raised substantial funds through InvITs and ToT.
• The Railways aim to meet higher targets with revised PPP policies extending concessions to 50 years.
• NMP 2.0 also involves selling minority stakes in listed public sector units (PSUs) to bring investors into boardrooms.

Challenges in Monetisation Formats

Monetisation formats must ensure compliance with strict service-level agreements (SLAs), focus on safety, modernisation, and public service, and maintain profitability. This requires a careful balance of penalties, subsidies, and obligations to ensure viability without eroding asset value.

The overall challenge lies in engaging private capital effectively without compromising public asset ownership or service quality.