Can the govt raise ~6 trn?
FINANCE MINISTER NIRMALA Sitharaman last week announced the national monetisation pipeline (NMP). The government has been eyeing asset monetisation for a long time, but it always had a disaggregated approach with each ministry setting its targets. However, this time the government aims to monetise assets worth ~6 trillion across 13 categories within the next four years.
Although over half the assets belong to roads and railways, sectors such as telecom, ports, mining, and power transmission are also part of the NMP (chart 1). For the first year, the government hopes to monetise ~88,000 crore worth of assets. The NMP may unlock more capital for the government, but the target seems gargantuan given its track record. For instance, the government had planned to raise ~5.2 trillion from disinvestment over the last five years, but it only managed to achieve 60 per cent of the target (chart 2). For roads, even though the revenue per kilometre the government plans to achieve (~6 per km) is lower than what it received during rounds one and three of toll-operatetransfer contracts (chart 3), one needs to remember that the model hasn’t taken off as per government expectations. As against a target of ~20,815 crore, it has only garnered ~14,692 crore, that too because the first auction fetched a 50 per cent premium.
Now the government plans to raise nearly ~40,000 crore each year from roads (chart 4). Its track record in the Railways is no different. The Railways has not been able to monetise its existing assets. Sundry earnings for the national carrier have been falling since 2016-17 (chart 5). Last year, the Railways had aimed to collect ~30,000 crore via privatisation of some routes, but it only received bids from two companies worth ~7,200 crore and had to cancel the auction (chart 6). Asset monetisation for BSNL and MTNL has remained a pipe dream since 2017. State governments have often buckled under pressure from unions on privatisation of power discoms. Although market conditions will play a significant role, the government also needs to ensure that the assets do not get concentrated in the hands of a few.