National Monetisation Pipeline and the infrastructure deficit

Infrastructure is key to speeding up growth

Updated - December 04, 2021 10:29 pm IST

Published - September 06, 2021 12:16 am IST

Salem, Tamil Nadu, 23/10/2020: Construction works progressing at Ariyanoor flyover on National Highways in Salem in Tamil Nadu on Friday, 23 October 2020. Photo: E.Lakshmi Narayanan / The Hindu

Salem, Tamil Nadu, 23/10/2020: Construction works progressing at Ariyanoor flyover on National Highways in Salem in Tamil Nadu on Friday, 23 October 2020. Photo: E.Lakshmi Narayanan / The Hindu

The government’s announcement of the National Monetisation Pipeline (NMP), a scheme to transfer the rights to operate public infrastructure for a fixed period, has received attention in the media. Hopefully, in the skirmish over the details of the scheme, not to mention the partisan allegations flying around, the fact of the severe infrastructure deficit that India faces, and the imperative to address it, will not get overlooked. We need infrastructure not only to speed up growth in a slackened economy but also to lead a dignified life, even after we have seen off the COVID-19 pandemic.

A significant criticism of the NMP is that the transfer would end up creating monopolies, leading to a rise in price. The creation of monopolies through public policy would be an embarrassment alright. However, the claim of an inevitable monopolisation is exaggerated as the outcome would differ according to the type of infrastructure.


Monopolisation is inevitable in the case of highways and railway lines, while it is not in the case of warehouses as all the warehouses need not be sold to a single bidder. On the issue of the price, Rajiv Kumar, Vice-Chairman of NITI Aayog, has emphasised that the price would be regulated and any increase of it capped in line with inflation when the government signs the contract with the concessionaire.

Whether private parties would be open to such an arrangement is a different question. And this really is the point. While the government may have announced its expectation of the proceeds from the monetisation, we are yet to ascertain the private sector’s interest in it. The NITI Aayog has flagged the success of the public-private partnership (PPP) governing the Mumbai-Pune Expressway, but there is also the unhappy experience of a leading infrastructure company opting out of the agreement to run the Delhi Airport Express Rail Link very early on, causing a disruption. India’s experience with PPP in infrastructure, enthusiastically pursued by both the United Progressive Alliance (UPA) and the National Democratic Alliance (NDA), has not been impressive. It may actually have contributed to the saddling of the public sector banks with non-performing assets.

Most infrastructure comes in the form of a public good, even when it may not be a natural monopoly. No wonder then that it has been built and managed by the public sector the world over. But the possibility that the price may rise after a transfer of public infrastructure to the private sector is not a good reason to oppose it. India’s infrastructure has not expanded precisely because the assets generate too little revenue for even their maintenance, leave alone upgradation, due to pricing practices in the public sector. This has held back growth of the economy. Moreover, it cannot simply be assumed that monopoly would lead to a higher price. The outcome would depend upon the costs of the concessionaire, which may well be lower than that of the public entities currently managing India’s assets. A comparison of the fares of Air India with that of private airlines is enough to see this.


The important consideration in an evaluation of the NMP would be the volume of funds expected to be generated. The government has announced an indicative value of ₹6 lakh crore accruing over four years. This is extraordinarily low in relation to two comparators. First, it is only 10% higher than the budgeted capital expenditure of the Government of India actually for 2021-22. Next, see it in relation to the figure of ₹100 lakh crore estimated as the infrastructural investment India needs. This was announced by Finance Minister Nirmala Sitharaman in her first Budget of 2019 and repeated by Prime Minister Narendra Modi in all his subsequent Independence Day speeches. Any claim of the innovativeness of the NMP pales beside this astute estimation made by the government itself. As for the carping by the Opposition, it distracts attention from the severe infrastructural deficit we face and the need to erase it.

Pulapre Balakrishnan teaches at Ashoka University, Sonipat, Haryana

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