What is Asset Monetisation?
Asset Monetisation is a process where the government converts underused or underutilized assets into revenue-generating entities. This involves leasing assets like roads, ports, and airports to private entities for a defined period, allowing them to operate and maintain these assets.
Why is Asset Monetisation Important for India?
Asset Monetisation is key to unlocking the value of public infrastructure investments. It's crucial for India's goal of becoming a US$ 5 trillion economy by 2025, especially in the wake of the Covid-19 pandemic. It enables the government to raise funds for new infrastructure without outright selling the assets.
What is the National Monetisation Pipeline (NMP)?
The NMP is a plan to monetise existing public assets worth US$ 72.76 billion (Rs. 6 trillion) by leasing them to private operators. This initiative, started in August 2021, aims to generate these funds over four years (2022-2025).
How Does Asset Monetisation Benefit Infrastructure Development?
The revenue generated from leasing these assets is reinvested by the government in building new infrastructure. This helps in creating a sustainable funding model for the development of high-quality infrastructure.
What are the Asset Monetisation Models?
1. Direct Contractual Models: Includes Brownfield Public-private Partnership (PPP) Concessions like Operate, Maintain & Transfer (OMT), Toll, Operate & Transfer (TOT), Operations, Maintenance & Development (OMD), and Rehabilitate Operate Maintain Transfer (ROMT).
2. Structured Financing Models: Includes Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs).
What Sectors are Included in the NMP?
The NMP covers various sectors such as roads, railways, power, oil and gas pipelines, telecommunications, and more, accounting for a significant portion of the projected revenue.
How Will This Initiative Support India's Sustainable Development Goals?
By investing the revenue generated through Asset Monetisation in new infrastructure, the government aims to create more employment opportunities, enhance market access, and improve the quality of life. This aligns with the Sustainable Development Goals 2030.
What is the Estimated Potential of the NMP?
The NMP is estimated to generate US$ 72.76 billion over four years, with sectors like roads and railways contributing significantly to this value.
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REITs and InvITs
Asset Monetisation: REITs and InvITs
What are Real Estate Investment Trusts (REITs)?
Real Estate Investment Trusts (REITs) are entities that own, operate, or finance income-generating real estate. Investors contribute capital to REITs, which is then invested in a diversified portfolio of real estate properties like commercial spaces, residential units, and other real estate assets. The income generated through rent or sale of these properties is distributed back to investors as dividends. REITs offer a way for individuals to invest in large-scale real estate projects without directly buying the property.
How do Infrastructure Investment Trusts (InvITs) function?
Infrastructure Investment Trusts (InvITs) are similar to mutual funds but specifically focus on infrastructure projects. They pool money from various investors to invest directly in infrastructure assets. This could include projects like highways, power transmission lines, and energy projects. InvITs generate income through the operation and management of these assets, which is then passed on to the investors. They enable investors to contribute to large infrastructure projects and earn returns from these investments.
Why are REITs and InvITs integral to Asset Monetisation in India?
REITs and InvITs play a crucial role in asset monetisation by providing an effective mechanism for the government to unlock the value of its infrastructure and real estate assets. They offer an alternative to traditional methods of funding infrastructure and real estate development, enabling wider public participation in funding these projects. This approach not only helps in raising capital but also ensures professional management of these assets, leading to better efficiency and returns.
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These questions about REITs and InvITs offer a deeper understanding of the structured financial models used in asset monetisation, which is essential for comprehending its impact on infrastructure development and investment opportunities in India. This knowledge is beneficial for those preparing for government civil services examinations and for anyone interested in the financial mechanisms behind large-scale infrastructure and real estate development.
