The long and the short of the NMP

It is surprising the Government has avoided mentioning the consequences of asset monetisation on ordinary citizens

Updated - September 07, 2021 08:12 am IST

Published - September 07, 2021 12:02 am IST

money bag with currency symbol: indian rupee

money bag with currency symbol: indian rupee

In the Budget for 2021-22, the Finance Minister, Nirmala Sitharaman , had announced the Government’s decision to monetise operating public infrastructure assets, declaring this as an important financing option for constructing new infrastructure. She announced that a “National Monetization Pipeline” (NMP) would be launched to achieve this objective ( Just months later, the NMP was unveiled, which shows that the Government intends to raise ₹6-lakh crore over the next four years by monetising several “core assets”. The term asset monetisation is not new in this government’s lexicon. It has been used during the proposed disinvestment of Air India and other public sector enterprises. Thus, asset monetisation is de facto “privatisation” of government-owned assets by another name.

Trying to make a distinction

One possible reason for the change in the terminology is the strong political undertones associated with the term “privatisation”. A two-volume NITI Aayog report (, which serves as the “asset monetisation guidebook”, explains that the NMP will help in “evolving a common framework for monetisation of core assets” and this will help draw a distinction from privatisation. But is there a functional distinction between asset monetisation and privatisation?

The NITI Aayog report describes asset monetisation as “transfer of performing assets … to unlock ‘idle’ capital and reinvesting it in other assets or projects that deliver improved or additional benefits”. In our view, asset monetisation raises three sets of questions. First, are the assets identified for monetisation “idle” or “performing”? Surely, they cannot be both. Second, can the country’s ordinary citizens expect to receive the purported “additional benefits”? And, finally, could the Government have looked for other avenues for mobilising resources, rather than selling tax-payers’ assets?

Explained | Why is there a push for asset monetisation?


The Government has identified “performing assets” to transfer to private entities and these are both strategic and significant. These include over 26,700 kilometres of highways, 400 railway stations, 90 passenger trains, 4 hill railways, including the Darjeeling Himalayan Railway. Moreover, existing public sector infrastructure in telecoms, power transmission and distribution and petroleum, petroleum products and natural gas pipelines are included in the NMP. If such assets were not offered, would the private sector be interested in acquiring rights over them?

Some data

Under the NMP, the Government intends to lease or divest its rights over these assets via long-term leases against a consideration that can be upfront and/or periodic payments. Thus, expected financial flows from leasing or divesting the Government’s share in these entities would be a major benefit for the central government, which is in the throes of a fiscal crisis. At the end of 2020-21, the central government’s debt to GDP ratio had exceeded 60%, increasing from 48.6% a year before. Current expectations are that in 2021-22, this figure will be close to 62%. Given this situation, the NMP is being projected as the ability of the Government to raise resources and to work its way out of the fiscal logjam.

Significant impact

The most surprising aspect of the Finance Minister’s announcement regarding the NMP is that the Government has avoided mentioning the consequences of asset monetisation on the ordinary citizens of the country. To understand this issue, two obvious dimensions need to be considered. First, the assets that are being offered for leasing or divestment have all been created through substantial contribution by the tax-paying public, who have stakes in their operation and management. Second, these assets have, until now, been managed by the Government and its agencies, which operate in public interest and are not driven by the profit-making considerations.

Therefore, charges borne by the public for using these assets have remained reasonable. With private companies getting the sole responsibility of running all these assets, from highways and railways to all the major utilities such as power, telecom and gas, the citizens of this country would be double-taxed. First, they paid taxes to create the assets, and would now pay higher user charges.

The reason for this is simple. Unlike the public sector entities, private companies are mandated, and quite justifiably so, to maximise their profits and to increase the returns enjoyed by the shareholders. In other words, it is not social benefit, but higher private returns that drives the corporates. Therefore, as the Government prepares to transfer “performing assets” to the private companies, it has the responsibility to ensure that user charges do not price the consumers out of the market. This critical dimension has not clearly been spelt out even in the NITI report. It is evident that consumers’ interest can be protected only if the Government can curb profit-maximising tendencies of the companies through regulators.

In the past episodes of privatisation of utilities, instead of effective regulation, there have been instances of regulatory capture instead, resulting in the exploitation of consumers. Take for example the privatisation of the power distribution system in the country’s capital. The then Congress government privatised power distribution, and this resulted in a steep increase in power charges that not only threatened to price out the poorer sections but adversely affected the middle class as well. Providing cheaper power was one of the main election promises of the Aam Aadmi Party, which was fulfilled by providing subsidised power to the consumer. But little does the capital’s electorate realise that the Government is providing subsidies from the taxes it collects. This implies that the city’s taxpayers are either paying higher taxes and/or foregoing public services for “benefiting” from “cheaper” power charges, while the companies are continuing to earn their promised profits.

Tapping the tax route

Finally, since the proposed asset monetisation has resulted from the resource crunch faced by the Government, a pertinent question is whether there were other avenues that it could have been tapped for plugging the resource gap. One possibility was to increase the tax revenue, for at 17.4% in 2019-20, India’s tax to GDP ratio was relatively low, as compared to most advanced nations. Improvements in tax compliance and plugging loopholes have long been emphasised as the surest way to improve tax revenue, but little has been done, as the following example shows. Since 2005-06, the Government has been providing data on the profits declared and taxes paid by companies that file their returns electronically. This data reveals that in 2005-06, 40% of these companies had declared that they were not earning any profits, and this figure had increased to over 51% in 2018-19. Further, the share of the reporting companies earning profits of ₹1 crore or less was 55% in 2005-06; this figure had declined to 43% in 2018-19. These numbers lend themselves to only one conclusion. India’s large companies have been exploiting the loopholes for reporting lower profits and to escape the tax net. But why have successive governments been so indulgent?

On public sector efficiency

According to NITI Aayog, the “strategic objective of the Asset Monetisation programme is to unlock the value of investments in public sector assets by tapping private sector capital and efficiencies”. The NITI Aayog objective assumes that public sector enterprises are inefficient, which is contrary to the reality. In 2018-19, while 28% of these enterprises were loss-making (, the corresponding figure for large companies was 51%. Is it realistic to assume that the asset monetisation programme would deliver efficiencies?

Biswajit Dhar is Professor, Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi

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