ASSET MONETISATION
structure assets.
The program will free up the government’s budget money for infrastructure creation, while giving investors access to sectors such as railways that were until now a state monopoly.
The finance minister while enumerating the reforms and initiatives undertaken by the current government towards accelerated infrastructure development and for incentivising private sector investments, including ‘Scheme of Financial Assistance to States for Capital Expenditure’, which incentivises state governments to recycle state government-owned assets for fast-tracking greenfield infrastructure, said, “At this point, the list of assets that are coming, are all the central government’s assets. We are not talking about states.”
The finance ministry said that the ministries of roads, transport and highways, railways, power, pipeline and natural gas, civil aviation, shipping ports and waterways, telecommunications, food and public distribution, mining, coal, housing and urban affairs will be a part of the National Monetisation Pipeline.
Revenue from monetising roads is pegged at ₹1.6 lakh crore, while that from railways is seen at ₹1.5 lakh crore, said Amitabh Kant, the chief executive officer of government think-tank NITI Aayog. As many as 160 coal projects, 25 airports and 31 projects spread across nine ports will also form part of the pipeline, he said.
Income from the monetisation plan is key to narrowing the nation’s budget deficit, which is pegged at 6.8% of the gross domestic product in the financial year that began April 1. Several economists expect the country will miss that target due to economic disruptions caused by a second wave of the Covid-19 pandemic.
In addition, the government has budgeted as much as ₹1.75 lakh crore from sale of stakes in state-run companies in the current fiscal year to make up for the pandemic-linked drop in tax revenue. That plan includes an initial public offering by Life Insurance Corporation of India (LIC) as well as stake sales in companies such as Bharat Petroleum and Air India.
Highlighting the strategic objective of the programme, NITI Aayog vice-chairman Dr Rajiv Kumar said, “It will to unlock the value of investments in brownfield public sector assets by tapping institutional and long-term patient capital, which can thereafter be leveraged for further public investments.”
He emphasised on the modality of such unlocking, which is anticipated to be by way of structured contractual partnership as against privatisation or slump sale of assets.
This is “a positive move in terms of fiscal dynamics”, Kanika Pasricha, an economist at Standard Chartered Plc, said. “Implementation needs close watch as this is monetization and ownership remains with the government.”
“The government does own very valuable assets and this should see investor interest,” said Sonal Varma, economist at Nomura Holdings Inc in Singapore. “This will be like an asset exchange, where the government sells its infrastructure assets and uses the revenue earned to invest in other infrastructure priorities that it has set.”