The Long And The Short Of The NMP

Context: National Monetization Pipeline (NMP), though it may help in mobilisation of resources for Government, the net gains are doubtful as citizen’s interests are at stake.

About National Monetization Pipeline (NMP) scheme

• Need for NMP:
  • Managing fiscal crisis: The central government’s debt to GDP ratio had exceeded 60%, increasing from 48.6% a year before.
  • Funding infrastructure upgradation: As budgetary measures are constrained amidst pandemic.
  • A call for efficiency improvements: To unlock the value of investments in public sector assets by tapping private sector capital and efficiencies.
• Policy features:
  • It was launched to mobilise Rs.6-lakh crore over the next 4 years by monetising several “core assets”.
  • The identified assets include over 26,700 kms highways, 400 railway stations, 90 passenger trains, 4 hill railways, including the Darjeeling Himalayan Railway, telecoms, power transmission and distribution and petroleum, petroleum products and natural gas pipelines.

Criticisms against the NMP scheme

• Citizen’s interests are at stake: Citizens paid taxes to create assets, and now they also have to pay higher user charges charged by the private authorities to extract profit.
• The policy guidelines overlook responsibility of Government to ensure that user charges do not price the consumers out of the market.
• Scope for regulatory capture: In the past episodes of privatisation of utilities, there have been instances of regulatory capture instead, resulting in the exploitation of consumers.
• Eg. privatisation of power distribution system in Delhi resulted in a steep increase in power charges, burdening public. The subsequent reduction in charges is based on subsidies (tax payers money).
• Limited scope of efficiency:  In 2018-19, while 28% of public sector enterprises were loss-making, the corresponding figure for large companies was 51%.

Way forward: Alternative policy options - 

• Tax revenue to be increased: At 17.4% in 2019, India’s tax-to-GDP ratio is relatively low compared to most advanced nations. Improvements in tax compliance and plugging loopholes are need of the hour.