National Monetisation Pipeline 2.0 (NMP 2.0)

Syllabus: GS3/Economy

Context

• Recently, the Union Finance Minister has launched the National Monetisation Pipeline 2.0 (NMP 2.0), targeting ₹16.72 lakh crore through asset monetisation over the period 2025–26 to 2029–30.

About

• National Monetisation Pipeline 2.0 (NMP 2.0) launched by the Union Finance Minister, builds on the original NMP (2021-2025) by outlining a ₹16.72 lakh crore roadmap for FY 2026-2030. 
• It targets operational “brownfield” public assets like highways and railways to unlock value through private investment, funding new greenfield infrastructure without raising fresh debt or taxes. 
• Developed by NITI Aayog with line ministries, it’s guided by the Ministry of Finance and monitored by the Core Group of Secretaries on Asset Monetisation (CGAM), chaired by the Cabinet Secretary.

Key Objectives

• Recycle existing assets to mobilize ₹5.8 lakh crore in private funds for capex.
• Boost private sector visibility via PPPs, InvITs (Infrastructure Investment Trusts), cash flow securitization, and strategic sales.
• Standardize processes from NMP 1.0 lessons, ensuring time-bound execution and proceeds routed to Consolidated Fund of India, PSUs, or states.

Major Sectoral Allocation

• Highways, MMLPs, Ropeways: ₹4.42 lakh crore
• Power: ₹2.77 lakh crore
• Ports: ₹2.64 lakh crore
• Railways: ₹2.62 lakh crore
• Coal: ₹2.16 lakh crore
• Mines: ₹1 lakh crore
• Capital Recycling Model: Asset monetisation follows the principle of ‘Asset Recycling’:
  • Monetise operational brownfield assets;
  • Use proceeds to fund greenfield infrastructure;
  • It reduces fiscal burden, and public debt pressure.
• Revenue Distribution: Proceeds are expected to flow primarily into Consolidated Fund of India, Direct private investment, PSU/Port Authority allocations, and State Consolidated Funds.

Benefits of NMP 2.0

• Capital Recycling: Unlocks value from brownfield assets and reinvests proceeds into new (greenfield) infrastructure projects without increasing public debt.
• Fiscal Consolidation: Reduces pressure on government borrowing and supports better management of the fiscal deficit.
• Enhanced Private Participation (PPP Boost): Deepens Public-Private Partnerships (PPP), improving efficiency, innovation, and risk-sharing in infrastructure development.
• Attraction of Long-Term Institutional Capital: Draws pension funds, sovereign wealth funds, and global investors into Indian infrastructure.
• Improved Asset Efficiency: Professional management by private players enhances operational efficiency and service quality.
• Development of Financial Markets: Promotes instruments like InvITs and TOT models, broadening infrastructure as an asset class.
• Boost to Logistics & Competitiveness: Monetisation of highways, ports, railways, and logistics parks strengthens supply chains and reduces transaction costs.
• Support to Viksit Bharat Vision: Accelerates infrastructure-led growth essential for achieving developed nation status by 2047.
• Job Creation & Multiplier Effect: Infrastructure expansion generates direct and indirect employment.
• Citizen Participation: Public InvITs allow retail investors to participate in infrastructure growth.

Challenges Ahead of NMP 2.0

• Asset Valuation Concerns: Risk of undervaluation of public assets. Lack of transparent and standardized valuation mechanisms.
• Political & Public Opposition Perception of ‘privatisation by stealth’. Resistance from trade unions and civil society.
• Regulatory & Policy Uncertainty: Frequent policy changes can deter long-term investors. Need for strong dispute resolution mechanisms in PPP contracts.
• Risk Allocation Issues: Improper risk-sharing between government and private players. Past PPP failures (e.g., traffic overestimation in highways) remain cautionary lessons.

Source: IE