Asset Monetisation refers to the process where the government transforms underutilized assets into revenue-generating entities. This is achieved by leasing assets such as roads, ports, and airports to private companies for a set period, allowing them to operate and maintain these facilities.
Asset Monetisation is crucial for unlocking the value of public infrastructure investments. It plays a significant role in India's ambition to become a US$ 5 trillion economy by 2025, particularly in the aftermath of the Covid-19 pandemic. Furthermore, it enables the government to raise funds for new infrastructure projects without the need to sell these assets outright.
The NMP is an initiative aimed at monetising existing public assets worth approximately US$ 72.76 billion (Rs. 6 trillion) by leasing them to private operators. Launched in August 2021, this plan is designed to generate these funds over a four-year period from 2022 to 2025.
The revenue generated from leasing these assets is reinvested by the government into new infrastructure projects. This creates a sustainable funding model that supports the development of high-quality infrastructure necessary for economic growth.
The NMP encompasses various sectors, including roads, railways, power, oil and gas pipelines, and telecommunications, which are expected to contribute significantly to the overall projected revenue.
By investing the revenue generated through Asset Monetisation in new infrastructure, the government aims to create more job opportunities, enhance market access, and improve the quality of life. This aligns with the Sustainable Development Goals set for 2030.
The NMP is projected to generate US$ 72.76 billion over four years, with substantial contributions expected from the roads and railways sectors.
Real Estate Investment Trusts (REITs) are entities that own, operate, or finance income-generating real estate. Investors provide capital to REITs, which is then invested in a diversified portfolio of real estate properties, including commercial spaces and residential units. The income generated through rent or sales is distributed back to investors as dividends, allowing individuals to invest in large-scale real estate projects without directly purchasing property.
Infrastructure Investment Trusts (InvITs) operate similarly to mutual funds but focus specifically on infrastructure projects. They pool resources from multiple investors to invest directly in infrastructure assets such as highways and energy projects. InvITs generate income through the operation and management of these assets, providing returns to investors.
REITs and InvITs are vital for asset monetisation in India, offering an efficient mechanism for the government to unlock the value of its infrastructure and real estate assets. They provide an alternative to traditional funding methods, promoting wider public participation in financing these projects, which ensures professional management and improved efficiency.
Q1. What is the purpose of the National Monetisation Pipeline?
Answer: The NMP aims to monetise public assets worth US$ 72.76 billion through leasing, generating funding for new infrastructure projects over four years.
Q2. How does Asset Monetisation benefit India’s economy?
Answer: It unlocks the potential of public assets, raises funds for infrastructure without selling, and supports India's goal to become a US$ 5 trillion economy.
Q3. What are REITs?
Answer: REITs are entities that invest in income-generating real estate, allowing investors to earn returns through dividends without directly owning properties.
Q4. How do InvITs operate?
Answer: InvITs pool investments from various individuals to directly invest in infrastructure projects, generating income through asset management and operations.
Q5. Why are REITs and InvITs important for infrastructure?
Answer: They provide effective funding mechanisms for infrastructure development, enhancing public participation and ensuring professional asset management.
Question 1: What does Asset Monetisation primarily aim to achieve in India?
A) Increase public assets
B) Generate revenue from underutilized assets
C) Sell government properties
D) Decrease infrastructure spending
Correct Answer: B
Question 2: What is the estimated revenue generation of the NMP over four years?
A) US$ 50 billion
B) US$ 72.76 billion
C) US$ 100 billion
D) US$ 10 billion
Correct Answer: B
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