The Union government announced the Asset Monetization plan under National Monetisation Pipeline(NMP) on Monday. The plan aims to identify and monetize the brownfield and under-utilized assets through private sector biddings. Centre plans to monetize about Rs.6 trillion ($81 billion) worth of public infrastructure assets for further new infrastructure developments, without selling off any assets and ownership to the private sectors. The NMP is set for a four-year (FY22-25) plan, and after the allotted period it will be mandatory to hand back the assets.
The asset monetization is majorly in sectors like roads (27%), Railways (25%), Power (15%), Oil & Gas pipelines (8%), and Telecom (6%). 52% of the total NMP value comprises just Railways and Roads.
15 railway stations, 25 airports, and 160 coal mining projects will be monetized under the scheme.
“We are fully committed to delivering success to the National Monetisation Pipeline. We feel that it is very important to bring in the private sector for better operation and maintenance. Therefore, we are committed to very strong delivery on the ground” stated CEO of NITI Aayog, Amitabh Kant.
How is it supposed to help the Government?
The government has failed in terms of economic and GDP growth and the ongoing privatization plans don’t seem to work as well. Economic disasters like demonetization, GST, Corporate Tax-Cuts led to revenue disruption, and to cope with the deficits, the common man has to suffer through the inflated petroleum product rates and direct taxes.
With general government debt at 90% of GDP and fiscal deficit reaching 9.4% of GDP this year, this scheme seems to be the last option for the government to recover some of the economic state’s debt.
The government is looking forward to an idea of “asset recycling”, as current Finance Minister Nirmala Sitharaman stated that by bringing in private participation, the monetization can be controlled better, and with whatever resource the government receives, can be used into further infrastructure development. The Centre emphasized the ownership of the underlying assets to be kept by them.
A senior Director at CRISIL, Sudip Sural stated, “For government entities sitting on piles of operating assets (such as roads, power lines and plants, ports, and railway tracks), recycling unlocks capital for both, fresh investments and deleveraging.” He added, “Operating infrastructure assets with stable cash flows for long tenures attract long-term investors such as pension and insurance funds. And for the economy and the public at large, more infrastructure is built, more jobs are created.”
This might sound great. But what if, the private players raise prices, and counter competition to maximize their profits. Well, If the Operator of a certain asset will not get the ownership and find low profit for them, they will not invest much in the asset to operate it, which will not bring much profit to the government also.
This raises the question that will these kinds of pacts even attract private players. And if they stand with profit-seeking motives, will the government negotiate with their pact? And if there are leakages in the operation, it will be impossible to monitor these schemes.
The plan could turn into a transfer mechanism of taxpayer-funded assets to a handful of business giants without proper regulation and bureaucracy. India is already witnessing a concentration of economic power in major sectors like telecom and transport.