Fu­ture cap­i­tal

Mon­etis­ing the Cen­tre’s non-core as­sets is fine, but the pro­ceeds must be used pro­duc­tively

The Hindu Business Line - - THINK -

After em­ploy­ing con­vo­luted and rather creative meth­ods to meet its dis­in­vest­ment tar­gets in its pre­vi­ous term, it is good to see the NDA gov­ern­ment in its sec­ond stint turn to the more straight­for­ward idea of mon­etis­ing idle as­sets. The De­part­ment of In­vest­ment and Pub­lic As­set Man­age­ment (DIPAM) has in­vited bids to em­panel global con­sul­tants to help it mon­e­tise non-core as­sets such as land, build­ings and op­er­a­tional as­sets held by state-owned firms. The DIPAM ex­pects the con­sul­tant to pre­pare fea­si­bil­ity re­ports for in­di­vid­ual as­sets and to de­sign both the model and the bid­ding process for as­set sales. While it is good to see the Cen­tre move ahead with plans to un­lock value from un­pro­duc­tive as­sets, it would be both un­de­sir­able and un­re­al­is­tic to ex­pect this as­set mon­eti­sa­tion exercise to raise quick cash to meet this year’s dis­in­vest­ment tar­get.

Be­fore any pri­vate sec­tor con­sul­tant can take on the task of preparing fea­si­bil­ity re­ports and de­vis­ing mod­els for the sale of the gov­ern­ment’s non­core as­sets, enu­mer­at­ing and iden­ti­fy­ing such as­sets is an es­sen­tial first step. But this prom­ises to be a long-drawn af­fair. Given the pe­cu­liar­i­ties of gov­ern­ment ac­count­ing which fo­cus mainly on cash re­ceipts and ex­penses of the state, gov­ern­ment de­part­ments in In­dia have his­tor­i­cally taken a lack­adaisi­cal ap­proach to iden­ti­fy­ing and main­tain­ing their im­mov­able as­sets, lead­ing to both loss of value and mis­use. De­spite FRBM rules man­dat­ing that all gov­ern­ment arms must main­tain an As­set Regis­ter many years ago, the CAG has had to re­peat­edly flag lapses by gov­ern­ment bod­ies even in main­tain­ing this sim­ple list of fixed as­sets at their orig­i­nal cost. This lack of over­sight is pre­cisely the rea­son why both the In­dian Rail­ways and Air In­dia, hold­ers of large tracts of gov­ern­ment land, have made scant progress with their own as­set mon­eti­sa­tion ef­forts. The In­dian Rail­ways’ Rail Land De­vel­op­ment Au­thor­ity which was set up a decade ago to mon­e­tise its land­hold­ings has been stonewalle­d by ti­tle and en­croach­ment is­sues. Air In­dia’s plans to raise over ₹5,000 crore through as­set mon­eti­sa­tion have yielded only a tenth of that num­ber, due to sim­i­lar prob­lems. There­fore, to set the ball rolling on its as­set mon­eti­sa­tion plans, the Cen­tre must first get its nu­mer­ous arms to com­ply with ba­sic ac­count­ing norms on their fixed as­sets.

Once such as­set sales do be­gin to gen­er­ate cash flows, the Cen­tre must also look to se­quester these pro­ceeds in­stead of min­gling them with rev­enue re­ceipts in the Union Bud­get which are frit­tered away in salary, in­ter­est and sub­sidy pay-outs. Gains from as­set mon­eti­sa­tion rep­re­sent a one-off op­por­tu­nity for the Cen­tre to raise cap­i­tal for pro­duc­tive use. In the in­ter­ests of in­ter-gen­er­a­tional eq­uity, the wind­falls should ideally be re-in­vested in cre­at­ing cap­i­tal or in­fra­struc­ture as­sets that can yield fu­ture re­turns to the ex­che­quer. Treat­ing as­set sales as just another source of in­come that fills the bud­get gap would be tan­ta­mount to sell­ing the fam­ily sil­ver to meet daily ex­penses.

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