Small Enterprise Brownfield Capital Asset Monetization Plan

India has the fastest-growing economy in the world and the world's sixth-largest government spending. Government spending and the necessity for rapid growth have supported the government in generating new revenue streams. India's disinvestment plan produced Rs. 32,000 CR in revenue in FY20 alone. 

The National Monetization Pipeline was created to generate additional money from the government's assets (especially brownfield assets) and other public sector divisions (PSUs). The goal of this asset monetization project was to lease rather than sell assets in order to recoup the underused value in them, hence increasing efficiency and providing scale. The program's purpose is to commercialise 13 key assets across many sectors.

Brownfield investments are those in which a private corporation or investor purchases or rents an existing infrastructure project or manufacturing facility in order to carry out new manufacturing operations. Under the National Monetization Program, the government intends to lease rather than sell brownfield assets. The government's objective is to monetize these assets, which are either underutilised or are not fully monetized, through private participation. 

To put this into perspective, India built a 756-kilometer Kokan Railway network in 1998. This rail network was underutilised in terms of freight consumption, which generates the most revenue. As a consequence, under the National Monetization Program, the government aims to monetize Rs. 3,600 CR.

A brownfield (sometimes spelled "brown-field") investment occurs when a firm or government organisation buys or rents existing manufacturing facilities in order to begin a new industrial activity. This is one common system of attracting foreign direct investment in the country.

A greenfield investment, in which a new plant is built, is an option. The obvious benefit of a brownfield investment plan is that the structures are already built. As a result, the expenses and time required to be up and running may be considerably reduced, and the structures may already be up to code.

Brownfield property, on the other hand, may have been abandoned or left useless for legitimate reasons such as pollution, soil contamination, or the presence of dangerous items.

A brownfield investment occurs when a firm or government organisation purchases or rents existing manufacturing facilities in order to begin a new industrial activity.

Greenfield investments, as opposed to brownfield investments, include the building of new property, plant, and equipment.

A brownfield investment is a type of foreign direct investment that is prevalent (FDI).

Brownfield investments provide several advantages, including structures that have already been erected, decreased starting time, lower prices, and buildings that are code compliant.

Brownfield land may also have been polluted by earlier usage, such as pollution, toxic materials, or other toxins.

When a property owner has no plans to repurpose an empty brownfield site, it is referred to as a mothballed brownfield.

Although asset monetization appears to be a novel notion, India has already monetized different assets through tactics such as disinvestment and infrastructure securitization. It was able to raise Rs. 32,845 crore (US$ 4.43 billion) through disinvestments during FY20–21. Air India was recently sold for Rs. 18,000 crore (US$ 2.43 billion), making it one of the largest privatisations in the country's history. This represents the scope of India's disinvestment initiative, as well as the capabilities of public sector enterprises and the new monetization scheme. So the current government introducedudyam registrationto help financially to small enterprises during crises.  

The asset monetization scheme has various advantages:

The monetization initiative assists the government in generating new revenue streams. This revenue creation from underused assets controlled by public sector units (PSUs) can help the government put the extra money to better use. The Indian government has already planned to use this increased cash for the national infrastructure initiative, which will assist India in building cutting-edge infrastructure over the next five years.

Privatisation boosts productivity and efficiency while also having a multiplier effect on the economy. Assets will be utilised to their full productive capability, assisting in the creation of jobs and supply networks. Economic growth will be aided by the use of these brownfield assets.

The National Monetization Program covers critical infrastructure projects necessary for the economy's growth. These current public infrastructure projects will be utilised efficiently, improving the quality of goods and services and so benefiting consumers.

The National Monetization Program would allow global institutional investors such as sovereign wealth funds (SWFs), pension funds (PFs), and insurance funds to establish a presence in India and invest in infrastructure. Investors favour brownfield projects due to the inherent risk in greenfield developments. These major institutional investors jointly control more than $30 trillion in assets.

India's Finance Minister announced the National Monetization Pipeline (NMP) during the Union Budget of 2021-2022. The government announced a Rs. 6,00,000 CR pipeline for the next four years, from FY22 to FY25. The primary goal of this monetization scheme was to assist the National Infrastructure Pipeline (NIP).

The overall anticipated value obtained through the asset monetization programme will account for 5.4 percent of the total infrastructure investment envisioned under the National Infrastructure Pipeline, which is Rs. 1,11,000 CR.

The asset monetization plan offers the government a significant opportunity to deleverage its balance sheets, allowing it to generate more budgetary flexibility. The government wants to use this budgetary headroom to support the National Infrastructure Pipeline (NIP), resulting in more greenfield investment.

The asset monetization strategy framework consists of the following elements:

The grant of "rights" but not "ownership"

Rather than selling assets, the asset monetization programme intends to grant rights to diverse private investors and monetize on those "rights." The plan was to lease the assets and profit from their worth.

Assets that have been derisked and generate consistent revenue

The initiative would provide the government with steady and sufficient revenue streams while also assisting it in de-risking brownfield assets and deleveraging financial sheets.

Partnerships that are structured

A structured relationship with well-defined contracts, high performance criteria, and key performance indicators will be established (KPIs).

Breakdown by industry

The asset monetization strategy is critical. The government intends to monetize assets in five primary industries, with 13 core asset classifications. Roadways (27 percent), railroads (25 percent), power (15 percent), oil and gas pipelines (8 percent), and telecommunications (8 percent) are the sectors (6 percent ). Railways and highways account for 52% of the overall value of the national asset monetization plan.

The national monetization plan will include 26,700 kilometres of roadways, railway stations, and tracks, 28,608 kilometres of power transmission lines, 6 gigatonnes (GW) of hydroelectric and solar power assets, 2,86,255 kilometres of fibre assets, and 14,917 telecom sector towers, 3,930 kilometres of petroleum pipelines, and 8,154 kilometres of natural gas pipelines. There will be over 20 asset classifications from over 12 departments around the nation.

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Over the fiscal year 21–22, the Indian government intends to monetize 15% of assets worth Rs. 88,000 CR. The actual pipeline phasing based on these assets' capital expenditure (capex).

Over 1,400 kilometres (km) of highway projects worth Rs. 17,000 CR have already been monetized by the Indian government, and five more assets have been monetized through the Power Grid Infrastructure Investment Trust, which has helped the government raise Rs. 7,700 CR. 

It also intends to commercialise 15 railway stations, 25 airports, 160 coal mining projects, 31 projects in 9 major ports, 210 lakh  metric tonnes (MT) of storage assets, and two national stadiums in two regional cities. Furthermore, revenue of Rs. 15,000 CR is projected from the renovation of different government colonies and hospitality assets, notably the (Indian Tourism Development Corporation) ITDC hotels.

According to the latest reports from the department, the asset monetization strategy has resulted in a paradigm shift in how the government sees brownfield assets. It will dramatically boost asset usage and infrastructure efficiency. Furthermore, the effort will generate revenue and deleverage the government's balance sheets. This will encourage credit expansion in the economy and help India begin a new investment cycle. Furthermore, the effort plans to use the proceeds from these monetized assets to support new greenfield projects, aiding India in developing world-class infrastructure and expanding economic opportunities. The National Monetization Program is a large-scale programme designed to help India achieve its goal of becoming a $5 trillion economy.