Economy: August 2021 Current Affair | Indian Economy for State PSC Exams - BPSC (Bihar) PDF Download

 Page 1


 
23                                                                                                                                                        
3. ECONOMY 
3.1. NATIONAL MONETISATION PIPELINE 
Why in news? 
Recently, the government of India has launched the National Monetisation Pipeline (NMP), a roadmap for asset 
monetisation of various brownfield infrastructure 
assets across sectors. 
About Asset Monetisation 
• Also commonly referred to as asset or capital 
recycling, it refers to the process of conversion 
of assets into economic value.  
• It is a constituent of the government’s non-
debt capital receipts. 
• Asset monetization, as a concept, entails 
offering public infrastructure to the private 
sector or institutional investors through 
structured vehicles and mechanisms.  
o Hence, monetization is distinct shift from 
‘privatization’ or ‘structured partnerships’ 
with the private sector within defined 
contractual frameworks.  
• It serves three critical objectives:  
o Unlocks value from public investment in 
infrastructure 
o Taps private sector efficiencies. 
o Creation of new sources of revenue by unlocking of value of hitherto unutilized or underutilized public 
assets. 
• This consists of limited period transfer of Brownfield Infrastructure Assets (where investment is already 
being made, but assets are either languishing or not fully monetized or under-utilized) to unlock “idle” 
capital. 
o Here, the private sector entity is expected to operate and maintain the asset based on the terms of the 
contract/concession, generating returns through higher operating efficiencies and enhanced user 
experience.  
o Funds, so received by the public authority, are reinvested in other assets or projects that deliver 
improved or additional benefits. This enables deployment of resources by government towards social 
sector and other competing public priorities. 
• Under the Union Budget 2021-22, Monetization of Assets has been identified as one of the three pillars for 
enhanced and sustainable infrastructure financing in the country. Accordingly, National Monetisation 
Pipeline (NMP) has been planned to be co-terminus with the National Infrastructure Pipeline (NIP) that was 
announced in 2019. 
Page 2


 
23                                                                                                                                                        
3. ECONOMY 
3.1. NATIONAL MONETISATION PIPELINE 
Why in news? 
Recently, the government of India has launched the National Monetisation Pipeline (NMP), a roadmap for asset 
monetisation of various brownfield infrastructure 
assets across sectors. 
About Asset Monetisation 
• Also commonly referred to as asset or capital 
recycling, it refers to the process of conversion 
of assets into economic value.  
• It is a constituent of the government’s non-
debt capital receipts. 
• Asset monetization, as a concept, entails 
offering public infrastructure to the private 
sector or institutional investors through 
structured vehicles and mechanisms.  
o Hence, monetization is distinct shift from 
‘privatization’ or ‘structured partnerships’ 
with the private sector within defined 
contractual frameworks.  
• It serves three critical objectives:  
o Unlocks value from public investment in 
infrastructure 
o Taps private sector efficiencies. 
o Creation of new sources of revenue by unlocking of value of hitherto unutilized or underutilized public 
assets. 
• This consists of limited period transfer of Brownfield Infrastructure Assets (where investment is already 
being made, but assets are either languishing or not fully monetized or under-utilized) to unlock “idle” 
capital. 
o Here, the private sector entity is expected to operate and maintain the asset based on the terms of the 
contract/concession, generating returns through higher operating efficiencies and enhanced user 
experience.  
o Funds, so received by the public authority, are reinvested in other assets or projects that deliver 
improved or additional benefits. This enables deployment of resources by government towards social 
sector and other competing public priorities. 
• Under the Union Budget 2021-22, Monetization of Assets has been identified as one of the three pillars for 
enhanced and sustainable infrastructure financing in the country. Accordingly, National Monetisation 
Pipeline (NMP) has been planned to be co-terminus with the National Infrastructure Pipeline (NIP) that was 
announced in 2019. 
 
24                                                                                                                                                        
 
 
 
Page 3


 
23                                                                                                                                                        
3. ECONOMY 
3.1. NATIONAL MONETISATION PIPELINE 
Why in news? 
Recently, the government of India has launched the National Monetisation Pipeline (NMP), a roadmap for asset 
monetisation of various brownfield infrastructure 
assets across sectors. 
About Asset Monetisation 
• Also commonly referred to as asset or capital 
recycling, it refers to the process of conversion 
of assets into economic value.  
• It is a constituent of the government’s non-
debt capital receipts. 
• Asset monetization, as a concept, entails 
offering public infrastructure to the private 
sector or institutional investors through 
structured vehicles and mechanisms.  
o Hence, monetization is distinct shift from 
‘privatization’ or ‘structured partnerships’ 
with the private sector within defined 
contractual frameworks.  
• It serves three critical objectives:  
o Unlocks value from public investment in 
infrastructure 
o Taps private sector efficiencies. 
o Creation of new sources of revenue by unlocking of value of hitherto unutilized or underutilized public 
assets. 
• This consists of limited period transfer of Brownfield Infrastructure Assets (where investment is already 
being made, but assets are either languishing or not fully monetized or under-utilized) to unlock “idle” 
capital. 
o Here, the private sector entity is expected to operate and maintain the asset based on the terms of the 
contract/concession, generating returns through higher operating efficiencies and enhanced user 
experience.  
o Funds, so received by the public authority, are reinvested in other assets or projects that deliver 
improved or additional benefits. This enables deployment of resources by government towards social 
sector and other competing public priorities. 
• Under the Union Budget 2021-22, Monetization of Assets has been identified as one of the three pillars for 
enhanced and sustainable infrastructure financing in the country. Accordingly, National Monetisation 
Pipeline (NMP) has been planned to be co-terminus with the National Infrastructure Pipeline (NIP) that was 
announced in 2019. 
 
24                                                                                                                                                        
 
 
 
 
25                                                                                                                                                        
About National Monetisation Pipeline (NMP) 
• NMP will help in evolving a common framework for monetisation of core assets. (Monetization through 
disinvestment and monetization of non-core assets have not been included in the NMP). 
o Core and Non-Core Assets: 
Assets which are central to the 
business objectives of an 
entity and are used for 
delivering infrastructure 
services to the public/ users 
are considered as Core Assets. 
Other assets, which generally 
include land parcels and 
buildings, can be categorised 
as non-core assets.  
• The total indicative value of NMP 
for Core Assets of Central 
Government has been estimated 
at Rs 6.0 lakh crore over the 4 
year period, FY 2022-2025.  
o This corresponds to ~5.4% of 
the total infrastructure investment 
envisaged under the NIP which is ~Rs 
111 lakh crore and ~14% of the 
proposed outlay for Centre (Rs 43 lakh 
crore).  
• The framework for monetisation of core 
asset monetisation has three key 
imperatives:  
o Monetisation of rights not 
ownership which means the assets will 
have to be handed back at the end of 
transaction life. 
o Brownfield de-risked assets 
with stable revenue 
generation profile and of 
critical importance. 
o Structured 
partnerships under defined 
contractual frameworks & 
transparent competitive 
bidding, where Contractual 
partners will have to adhere 
to Key Performance 
Indicators (KPIs) and 
Performance Standards.  
• The assets and transactions identified under the NMP are expected to be rolled out through a range of 
instruments/models (refer infographic).  
Page 4


 
23                                                                                                                                                        
3. ECONOMY 
3.1. NATIONAL MONETISATION PIPELINE 
Why in news? 
Recently, the government of India has launched the National Monetisation Pipeline (NMP), a roadmap for asset 
monetisation of various brownfield infrastructure 
assets across sectors. 
About Asset Monetisation 
• Also commonly referred to as asset or capital 
recycling, it refers to the process of conversion 
of assets into economic value.  
• It is a constituent of the government’s non-
debt capital receipts. 
• Asset monetization, as a concept, entails 
offering public infrastructure to the private 
sector or institutional investors through 
structured vehicles and mechanisms.  
o Hence, monetization is distinct shift from 
‘privatization’ or ‘structured partnerships’ 
with the private sector within defined 
contractual frameworks.  
• It serves three critical objectives:  
o Unlocks value from public investment in 
infrastructure 
o Taps private sector efficiencies. 
o Creation of new sources of revenue by unlocking of value of hitherto unutilized or underutilized public 
assets. 
• This consists of limited period transfer of Brownfield Infrastructure Assets (where investment is already 
being made, but assets are either languishing or not fully monetized or under-utilized) to unlock “idle” 
capital. 
o Here, the private sector entity is expected to operate and maintain the asset based on the terms of the 
contract/concession, generating returns through higher operating efficiencies and enhanced user 
experience.  
o Funds, so received by the public authority, are reinvested in other assets or projects that deliver 
improved or additional benefits. This enables deployment of resources by government towards social 
sector and other competing public priorities. 
• Under the Union Budget 2021-22, Monetization of Assets has been identified as one of the three pillars for 
enhanced and sustainable infrastructure financing in the country. Accordingly, National Monetisation 
Pipeline (NMP) has been planned to be co-terminus with the National Infrastructure Pipeline (NIP) that was 
announced in 2019. 
 
24                                                                                                                                                        
 
 
 
 
25                                                                                                                                                        
About National Monetisation Pipeline (NMP) 
• NMP will help in evolving a common framework for monetisation of core assets. (Monetization through 
disinvestment and monetization of non-core assets have not been included in the NMP). 
o Core and Non-Core Assets: 
Assets which are central to the 
business objectives of an 
entity and are used for 
delivering infrastructure 
services to the public/ users 
are considered as Core Assets. 
Other assets, which generally 
include land parcels and 
buildings, can be categorised 
as non-core assets.  
• The total indicative value of NMP 
for Core Assets of Central 
Government has been estimated 
at Rs 6.0 lakh crore over the 4 
year period, FY 2022-2025.  
o This corresponds to ~5.4% of 
the total infrastructure investment 
envisaged under the NIP which is ~Rs 
111 lakh crore and ~14% of the 
proposed outlay for Centre (Rs 43 lakh 
crore).  
• The framework for monetisation of core 
asset monetisation has three key 
imperatives:  
o Monetisation of rights not 
ownership which means the assets will 
have to be handed back at the end of 
transaction life. 
o Brownfield de-risked assets 
with stable revenue 
generation profile and of 
critical importance. 
o Structured 
partnerships under defined 
contractual frameworks & 
transparent competitive 
bidding, where Contractual 
partners will have to adhere 
to Key Performance 
Indicators (KPIs) and 
Performance Standards.  
• The assets and transactions identified under the NMP are expected to be rolled out through a range of 
instruments/models (refer infographic).  
 
26                                                                                                                                                        
Challenges in implementation and associated risks 
• Financial Challenges-  
o Lack of identifiable revenue streams in various infrastructure assets. For instance, a significant 
proportion of National Infrastructure Pipeline is to be financed by the Private Sector but the mechanisms 
for revenue transfer have not be specified.  
o Difficulty in attracting investors: Less-than-encouraging bids in the recently launched PPP initiative in 
trains indicate that attracting private investors' interest is not that easy. 
o Leasing of public utilities to private investors could lead to higher prices for consumers.  
• Regulatory Challenges-  
o Lack of independent sectoral regulators who could provide dedicated domain expertise and 
simultaneously aid development of the sector.  
o Structural problems such as legal uncertainty and the absence of a deep bond market that hold back 
private investment in infrastructure. This is further compounded by Inefficient Dispute resolution 
mechanism. 
o The allocation of assets owned by governments to private investors is often subject to political 
influence, which can lead to corruption.  
 
Page 5


 
23                                                                                                                                                        
3. ECONOMY 
3.1. NATIONAL MONETISATION PIPELINE 
Why in news? 
Recently, the government of India has launched the National Monetisation Pipeline (NMP), a roadmap for asset 
monetisation of various brownfield infrastructure 
assets across sectors. 
About Asset Monetisation 
• Also commonly referred to as asset or capital 
recycling, it refers to the process of conversion 
of assets into economic value.  
• It is a constituent of the government’s non-
debt capital receipts. 
• Asset monetization, as a concept, entails 
offering public infrastructure to the private 
sector or institutional investors through 
structured vehicles and mechanisms.  
o Hence, monetization is distinct shift from 
‘privatization’ or ‘structured partnerships’ 
with the private sector within defined 
contractual frameworks.  
• It serves three critical objectives:  
o Unlocks value from public investment in 
infrastructure 
o Taps private sector efficiencies. 
o Creation of new sources of revenue by unlocking of value of hitherto unutilized or underutilized public 
assets. 
• This consists of limited period transfer of Brownfield Infrastructure Assets (where investment is already 
being made, but assets are either languishing or not fully monetized or under-utilized) to unlock “idle” 
capital. 
o Here, the private sector entity is expected to operate and maintain the asset based on the terms of the 
contract/concession, generating returns through higher operating efficiencies and enhanced user 
experience.  
o Funds, so received by the public authority, are reinvested in other assets or projects that deliver 
improved or additional benefits. This enables deployment of resources by government towards social 
sector and other competing public priorities. 
• Under the Union Budget 2021-22, Monetization of Assets has been identified as one of the three pillars for 
enhanced and sustainable infrastructure financing in the country. Accordingly, National Monetisation 
Pipeline (NMP) has been planned to be co-terminus with the National Infrastructure Pipeline (NIP) that was 
announced in 2019. 
 
24                                                                                                                                                        
 
 
 
 
25                                                                                                                                                        
About National Monetisation Pipeline (NMP) 
• NMP will help in evolving a common framework for monetisation of core assets. (Monetization through 
disinvestment and monetization of non-core assets have not been included in the NMP). 
o Core and Non-Core Assets: 
Assets which are central to the 
business objectives of an 
entity and are used for 
delivering infrastructure 
services to the public/ users 
are considered as Core Assets. 
Other assets, which generally 
include land parcels and 
buildings, can be categorised 
as non-core assets.  
• The total indicative value of NMP 
for Core Assets of Central 
Government has been estimated 
at Rs 6.0 lakh crore over the 4 
year period, FY 2022-2025.  
o This corresponds to ~5.4% of 
the total infrastructure investment 
envisaged under the NIP which is ~Rs 
111 lakh crore and ~14% of the 
proposed outlay for Centre (Rs 43 lakh 
crore).  
• The framework for monetisation of core 
asset monetisation has three key 
imperatives:  
o Monetisation of rights not 
ownership which means the assets will 
have to be handed back at the end of 
transaction life. 
o Brownfield de-risked assets 
with stable revenue 
generation profile and of 
critical importance. 
o Structured 
partnerships under defined 
contractual frameworks & 
transparent competitive 
bidding, where Contractual 
partners will have to adhere 
to Key Performance 
Indicators (KPIs) and 
Performance Standards.  
• The assets and transactions identified under the NMP are expected to be rolled out through a range of 
instruments/models (refer infographic).  
 
26                                                                                                                                                        
Challenges in implementation and associated risks 
• Financial Challenges-  
o Lack of identifiable revenue streams in various infrastructure assets. For instance, a significant 
proportion of National Infrastructure Pipeline is to be financed by the Private Sector but the mechanisms 
for revenue transfer have not be specified.  
o Difficulty in attracting investors: Less-than-encouraging bids in the recently launched PPP initiative in 
trains indicate that attracting private investors' interest is not that easy. 
o Leasing of public utilities to private investors could lead to higher prices for consumers.  
• Regulatory Challenges-  
o Lack of independent sectoral regulators who could provide dedicated domain expertise and 
simultaneously aid development of the sector.  
o Structural problems such as legal uncertainty and the absence of a deep bond market that hold back 
private investment in infrastructure. This is further compounded by Inefficient Dispute resolution 
mechanism. 
o The allocation of assets owned by governments to private investors is often subject to political 
influence, which can lead to corruption.  
 
 
27                                                                                                                                                        
• Asset-specific Challenges- 
o Low Level of capacity utilisation in gas and petroleum pipeline networks. 
o Regulated tariffs in power sector assets. 
o Low interest among investors in national highways below four lanes. 
Way ahead 
NMP is a great step forward but successful execution of the plan remains key to its success. For this: 
• Contracts must be designed to allow for some flexibility for addressing unforeseen developments (such as 
climate-related disasters) and to prevent needless and longwinded litigation.  
• Clear quality benchmarks must be set for the assets that are handed over by the government and for KPIs 
expected of the private party for operating and maintaining the asset.  
• There is a need to set up a robust mechanism for dispute resolution relating to PPP contracts as 
recommended by the Kelkar Committee on PPPs. 
3.2. SEVEN YEARS OF PRADHAN MANTRI JAN DHAN YOJANA 
Why in news? 
Recently, the Pradhan Mantri Jan-Dhan 
Yojana (PMJDY), announced in 2014 has 
completed seven years of its 
implementation.  
About Pradhan Mantri Jan-Dhan Yojana 
(PMJDY) 
• It is National Mission for Financial 
Inclusion to ensure access to 
financial services, namely, Banking/ 
Savings & Deposit Accounts, 
Remittance, Credit, Insurance, 
Pension in an affordable manner. 
o Financial inclusion is the 
process of ensuring access to 
financial products and services needed by vulnerable groups at an affordable cost in a transparent 
manner by institutional players. It is a major step towards inclusive growth.  
o The concept of financial 
inclusion was first 
introduced in India in 
2005 by the Reserve Bank 
of India. 
• Objectives of the scheme:  
o To ensure access to 
various financial services 
like access to need based 
credit, insurance and 
pension to the excluded 
sections i.e. weaker 
sections and low income 
groups. 
o Use of technology to lower cost and widen the reach of financial sector. 
Achievements of PMJDY 
• PMJDY accounts:  They have grown three-fold from 14.72 Crore in 2015 to 43.04 Crore in 2021.  
o More than half of the beneficiaries are women and about two-third of the accounts are in rural and 
semi-urban areas.