Unlocking Public Assets

Business Standard     15th February 2021     Save    

Context: Introduction of a different approach to monetizing public assets can ensure a sufficient flow of funds to India's infrastructure sector.

Challenges to Infrastructure Finance in India

  • Revenue shortfall: government itself rarely has enough revenues to match its ambitions on infrastructure investment.
  • Reluctance of private sector: to finance infrastructure in a domain that is so exposed to political risk.
    • Also suffered the adverse impacts of slowdowns, cost and time overruns, and accusations of corruption.

    Features of Asset Monetisation Programme/Approach 

    • Role of the public sector: in choosing, designing building of the project. 
    • Role of Private sector: after the completion of project, it will be handed over to an investment trust or the private sector, with the state-run firm retaining ownership at some level.
      • E.g. the assets might be bundled together and the income from those securitized.
    • Profit utilization: The money thus garnered will be ploughed back into infrastructure investment.
    • Different from privatization: While the privatization focuses on increasing value in the enterprise and a net gain in national income and welfare; asset monetization would bring consistent revenue for the government.
    • Land monetization: would solve problems associated with straight-out sales of land owned by Public Sector Enterprises (PSE) and government (such as accusations of asset stripping).

              Key Concerns Associated with the Implementation 

              • Lack of clarity over land-use changes: titles to tracts of government and PSE owned land may not be entirely clear.
                • State governments can block land-use changes unless they get their share of the pie.
                • Price setting task would require an independent agency staffed with fulltime experts to manage land monetization programme.
              • Questions over sustainability:  State determined choices and quality of built infrastructure have not typically led to the best outcomes in India.
              Conclusion: The asset monetization programme is implemented will be crucial not just in terms of its success at revenue generation but also whether it becomes a viable model for infrastructure finance.