ASSET MONETIZATION

Recently, the National Highway Authority of India (NHAI) raised its highest-ever monetization value of Rs. 15,624.9 Crore through the Infrastructure Investment Trust (InvIT) mode. 

About Asset Monetization (AM) 

• Genesis: The idea of AM was first suggested by a committee led by economist Vijay Kelkar in 2012. 
  • AM was announced in the Union Budget 2021-22 through the National Monetisation Pipeline. 
• Definition: AM is the process of creating new sources of revenue for the government and its entities by unlocking the economic value of unutilised or underutilised public assets. 
  • A public asset can be any property owned by a public body, roads, airports, pipelines, etc. 
• Authority: An authorised Core Group of Secretaries on Asset Monetisation (CGAM) has been constituted under the chairmanship of the Cabinet Secretary to implement and monitor the project.
• Process of Asset Monetisation (AM) 
  • AM involves the license/lease of a government-owned asset to a private sector entity for a specific period. 
  • The transfer of rights in exchange for p
  • ayments is governed by a concession agreement that facilitates balanced risk-sharing between the public authority and the private party.  

Need for Asset Monetisation in India 

• Fund the National Infrastructure Pipeline (NIP): NIP is aimed to provide world-class infrastructure to citizens and attract investments into this sector. 
  • NIP envisages an investment of 111 lakh crore over 2020 to 2025. 
• Reduction of the fiscal strain: The capital invested by private parties during AM can reduce the fiscal burden on the public sector and free up resources for developing new infrastructure projects. 
• Provision of finance to the State for the creation of new infrastructure: AM plays an important role in providing finance to the State for the creation of new infrastructure. 
• Benefit from private sector efficiencies: AM will invite private sector efficiencies and transparency in the management of public assets. 
• Facilitate economic development of the country: A robust AM plan could upgrade economic productivity, encourage demand, create jobs, boost growth prospects, and accelerate the country’s economic development. Initiatives taken for Asset Monetization 

 Concession Agreement (CA): “It is a contract that gives a company the right to operate a specific business within a government’s jurisdiction or on another firm’s property, subject to particular terms.”