On Assets, A Narrow View

Context: National monetisation pipeline ignores contemporary challenges of pandemics, global warming and social unrest and is blinkered to structural problems of state-owned enterprises.

Significance of monetisation of assets

• Dead capital utilisation: With the objective of raising Rs 6 lakh crore over the next four years.
• Relieving heavy hand of bureaucratic intervention: In the management of public assets. 

Concerns related to National Monetisation Pipeline (NMP)

• Narrow framework: While the world is in the crosshairs of existential challenges — global warming, pandemics, geopolitical chaos and fundamentalism, NMP has been conceptualised around the metrics of financial value.
• India has to additionally tackle endemic poverty, disappointed expectations, social polarisation and the erosion of democratic institutions. In this context, this scheme has been set within too narrow a frame.
• Thus, the model looks at public utility assets through the narrow lens of finance only and, thereby, underrates their potential contribution to public welfare.
• The model absolves the government from the responsibility to unlock the intrinsic “social” (to include “smart” and “clean” ) value of these assets.
• May lead to deepening of inequalities: NMP is designed to attract deep-pocketed financial institutions (PE firms) and industrial conglomerates. 
• This is because the valuations are so high that few other entities will have the resources/risk carrying capacity.
• Core problems not identified: If the reason for low productivity of the public assets is due to poor leadership, then only private involvement seems logical. However, when the structural issues are out of the control of PSEs, the transfer of leadership won’t work.
• The example of gas pipelines is illustrative. These pipelines are indeed hugely underutilised. But this is not because of the “inefficiency” of GAIL, the PSE operator. 
• It is because structural factors beyond the control of GAIL like  - a shortage of domestic gas supplies, the regressive taxation system, the relatively uncompetitive price of gas and the perennial tussle between the Centre and state governments over land access.

Conclusion: 

• Until and unless these systemic problems are addressed, the private sector will find it difficult to harness the full value of these assets, and the transfer of operatorship to them will offer at best a partial palliative.
• Private-public investment structures make sense, but they must be modelled to also generate social value. In today’s world, there are no shortcuts to sustainable development.