The Centre has kicked off the process of hiring consultants to push its plans to sell idle land assets and properties owned by public sector enterprises. As the new government gets ready to present its first full Budget on July 5, land monetisation will be a key component of disinvestment to help government raise revenues.
Assets of over two dozen public sector enterprises in various sectors including power, textiles and fertilisers are likely to be put up for monetisation. Unused land and residential properties held by these companies, closed industrial units, and plants are among the assets to be considered for sale, sources said.
The move is critical at a time when the government needs to raise resources to spend and push growth without derailing its fiscal consolidation roadmap.
Sources said the Department of Investment and Public Asset Management (DIPAM), in consultation with the NITI Aayog, has done “sufficient” background work to initiate the process of land monetisation at a significant scale. The government may adopt different models for land monetisation depending upon the nature of assets. These could include securitising a pool of assets through structures like REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts), getting the successful bidders to make large upfront payment for the assets combined with annual payments, and small or no upfront payment along with annual payments.
While the consultancy firms being hired by DIPAM will help formulate the land monetisation strategy, the process of auctioning these parcels electronically is expected to be handled by state-owned MSTC Limited. Separately, the government has already initiated the process of selling idle properties and land assets of state-owned carrier Air India.
In a proposal to empanel property consultancy firms floated earlier this month, DIPAM said that “many of the assets are sub-optimally utilised and can be appropriately monetised to create greater financial leverage and value for the companies and the government, being the shareholder. Government intends to monetise select non-core and other assets owned by CPSEs/ PSUs/ other government organisation using appropriate model.”
These assets will also include idle plant and machinery, pipelines, textile mills and towers among others. Funds raised through such asset sales will be counted as disinvestment proceeds. The government has raised Rs 2,357.10 crore in the first two months of 2019-20, for which a disinvestment target of Rs 90,000 crore was set in the Interim Budget in February. In 2018-19, the government raised Rs 84,972.16 crore against the budgeted target of Rs 80,000 crore.
To expedite the process, instead of the earlier mechanism of mainly NBCC being nominated as the land management agency for monetising assets of closed and sick companies, the government has now put in place a formal structure to take decisions on land monetisation. On March 8, DIPAM had issued guidelines relating to asset monetisation, which said that an inter-ministerial group suggest assets for sale based on the recommendations NITI Aayog or on its own.
The proposals of IMG will need approval of Alternative Mechanism, which comprises the finance minister, transport minister and minister of the concerned administrative ministry. On February 28, the Cabinet had empowered the Alternative Mechanism to approve disposal of assets of PSUs and enemy property asset monetisation.