Indians may soon be paying more taxes — not through Parliament-approved hikes, but through toll gates, power bills and user fees.
With the expansion of the National Monetisation Pipeline-2 (NMP-2), the government has effectively introduced a new asset-monetisation regime that risks raising the overall tax burden quietly and pervasively. What is presented as innovative financing could, in practice, function as an additional layer of indirect taxation embedded into everyday life.
This marks more than a change in how infrastructure is funded. It signals a structural shift in taxation itself — away from transparent, legislated taxes toward charges that citizens pay daily without debate or scrutiny.
India already derives nearly 45 percent of its tax revenues, as per the Economic Survey, from indirect levies such as GST and excise, the most regressive form of taxation. Monetisation threatens to push that share even higher, to above 47 percent. For poorer households, nearly half of every rupee spent could carry some tax or fee component. For middle-class families paying both income tax and consumption taxes, the cumulative burden may absorb most of their incremental earnings.
In practice, it feeds inflation, erodes disposable incomes and dampens growth.
The government calls it “monetisation”. Citizens may soon experience it as extraction. A tax that bypasses Parliament for raising revenues, which would be shown as fees.
Indirect tax collections for FY 2024-25 are driven by robust GST revenue hit a record high of Rs 22.08 lakh crore (9.4% increase). Total indirect tax collections for FY25 are estimated at Rs 18.37 lakh crore, with the overall indirect tax-to-GDP ratio standing at 4.9percent.
The government had estimated around Rs 2.58 lakh crore in customs and Rs 3.36 lakh crore in excise duty for 2025-26. But customs collection dropped by 7.3 percent to Rs 1.43 lakh crore, till November. Excise accrual grew by 7.9 percent.
The NMP-2 numbers alone explain why alarm bells should ring. In the Union Budget 2025–26, the government set a Rs10 lakh crore target for NMP 2.0 covering FY26–30. It estimates a total monetisation potential of Rs 16.72 lakh crore — 2.6 times larger than the first phase.
Invisible Extraction
Highways, power grids, railways, ports, mining blocks and pipelines — assets built with taxpayer money over decades — will be leased to private operators. Ownership remains public, we are told, but control, pricing power and revenue streams shift to profit-maximising entities.
A low-income household pays the same GST on cooking oil or transport as a wealthy one. The poor therefore surrender a larger share of their earnings.
The expanded NMP 2.0 risks deepening this imbalance.
By leasing infra and assets to private operators and allowing them to recover investments through user charges, the state is effectively embedding a new layer of quasi-taxes into everyday life.
It is a shift from visible taxation to invisible extraction.
The logic
When Finance Minister Nirmala Sitharaman presented the monetisation plan, the rationale appeared straightforward: lease operational public assets, raise upfront resources and reinvest the proceeds into new infrastructure without expanding fiscal deficits or debt.
In accounting terms, the approach seems prudent. Instead of borrowing, the government “unlocks value” from existing assets.
But economically, the distinction is less benign.
If the programme seeks to mobilise Rs16.72 lakh crore between FY26 and FY30 — more than twice the earlier phase — those funds must ultimately come from users. Infrastructure assets generate revenue only by charging citizens.
Thus, what appears as non-tax revenue in the Budget is, in practice, indirect taxation through tolls, tariffs and service fees.
A lease that functions like a sale
The government emphasises that ownership remains public and assets revert after concession periods. Legally, this may be accurate.
For citizens, however, that distinction is immaterial.
Once a private operator controls a highway or transmission line for decades, pricing decisions move beyond public accountability. The asset stops functioning as a public good and becomes a commercial revenue source.
Users must pay each time they access it.
Infrastructure built with taxpayer money begins charging taxpayers again.
Monopoly economics
The inflationary risks stem from the nature of the sectors involved.
Highways, railway stations, ports and power networks are natural monopolies. Consumers cannot easily choose alternatives. Once such assets are leased, pricing power becomes concentrated.
Private concessionaires paying large fees must ensure returns. The simplest route is periodic increases in tolls and tariffs. Transfer-Operate-Transfer models incentivise revenue maximisation.
Efficiency improvements is more an adage, but they rarely translate into lower charges. The outcome is predictable: steadily rising user fees.
From user charges to inflation
These higher charges ripple through the economy.
Costlier highways raise freight expenses, which feed into food prices. Power tariff revisions raise industrial costs. Port and logistics charges inflate imports and retail goods. Mining costs affect steel, cement and housing.
The impact is cumulative. This is classical cost-push inflation.
The Reserve Bank of India may attempt to manage inflation through monetary tightening, but interest rates cannot reduce tolls or cap port charges. Monetary policy cannot address monopoly pricing. The present rates are around 4.2 percent.
If infrastructure becomes permanently expensive, inflation becomes structural.
Structural inflation steadily erodes purchasing power.
Paradox of revenue abundance
The turn toward monetisation is puzzling given strong tax collections. GST accruals are about 40 percent of the revenues, averaging Rs1.68 lakh crore a month. Indirect tax receipts have grown consistently and the tax base has expanded.
The government is not facing a collapse of revenues.
If additional funds are needed for capital expenditure, progressive direct taxation or better compliance could distribute the burden more fairly. Instead, the system becomes less equitable even as collections rise.
Growth implications
There is a clear macroeconomic trade-off. Higher tolls, tariffs and user charges shrink disposable incomes, weakening consumption and hurting small businesses first. Rising logistics and energy costs erode competitiveness, compress manufacturing margins, raise export prices and slow investment. Infrastructure is meant to lower the cost of doing business; when it raises costs, growth suffers.
There is also an institutional risk. As monetisation becomes routine, governments may rely on leasing assets to plug fiscal gaps, turning public wealth into recurring revenue streams — closer to mortgaging than recycling. Repeated monetisation turns public assets into fiscal crutches, encouraging more leasing instead of reform, raising user charges and costs for citizens.
If the NMP lifts living expenses, it becomes hidden tax burden, not reform, hurting growth prospects long term.
Monday, March 2, 2026