Unlocking Public Assets

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.