Centre readies list of land assets for disinvestmenthttps://indianexpress.com/article/business/market/centre-readies-list-of-land-assets-for-disinvestment-5819952/

Centre readies list of land assets for disinvestment

The government has a list of 29 companies that will be put up for strategic sales to private companies.

Union Budget 2019, land assets, ltd companies, limited companies, land disinvestment, equities market, india business, indian market,
The Union Budget 2019 has set a high target of Rs 1.05 lakh crore from disinvestment for the current fiscal year, compared with Rs 90,000 crore in the Interim Budget. (Representational image)

The government has prepared a “substantial inventory” of land assets that can be monetised, and the process of such sales will be finalised very soon. The Centre is also keen on strategic sales, and three fresh expressions of interest will be announced next week, Department of Investment Public Assets Management Secretary Atanu Chakraborty told The Indian Express.

Chakraborty said many measures in the Budget, like raising the limit of public shareholding in listed companies, will help in attracting fund flows to the equities market.

Explained

Strong political will needed

The government has bet on disinvestment and land asset monetisation to raise over Rs 1 lakh crore this year. A virtuous cycle for sell-off and land asset sale can be set in motion if there is strong political will. This can help raise significant resources, especially when the economy is slowing and tax revenues are not so buoyant.

“In strategic disinvestment, we go case-by-case. Air India has already been announced, but that’s just one case. Next week, we will announce three more expressions of interest. Therefore, there would be a continuous conveyor belt where we will keep putting products,” he said.

READ | DIPAM secretary Atanu Chakraborty: ‘Will keep putting products for sale on the conveyor belt’

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The government has a list of 29 companies that will be put up for strategic sales to private companies. Chakraborty said the government will put out certain land assets to test the market response and then scale up the process.

The Union Budget 2019 has set a high target of Rs 1.05 lakh crore from disinvestment for the current fiscal year, compared with Rs 90,000 crore in the Interim Budget. Apart from residual stake sales, buybacks and strategic sales, land monetisation will be a key component of the Centre’s push to raise resources.

“The Cabinet has defined the broader processes, we are putting in various intermediaries in place, including consultants, and laying down all the details of various documentation agreements and that is a lot of work… (the government) will put out certain assets for sale, and test the response. As we ramp up more, it will bring more people to bring their assets in the fold. And then, we start working even more. That is how we propose to go,” Chakraborty said.

He said the government has a fairly “substantial inventory” of land and will put out “the clean inventory, which can go for sale very quickly.” 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 successful bidders to make large upfront payment for assets combined with annual payments, and small or no upfront payment along with annual payments.

The government has raised Rs 2,357.10 crore in the first two months of 2019-20. In 2018-19, the government raised Rs 84,972.16 crore against the budgeted target of Rs 80,000 crore. The initial reaction of the stock markets to the Budget notwithstanding, Chakraborty said the government has announced several measures that will attract equity flows into the market.

For example, the proposal of raising public shareholding from 25 per cent to 35 per cent will lead to higher flows in the long term. “(The analysts) forgot that the additional float will be seen positively by the MSCI EM index, they will see the major companies and change the weight and more flow will come in. Even our analysts have to change their way. This Budget is a paradigm shift in the way it went about how it would happen as an architecture,” Chakraborty said.

“What happens is that the analysts quickly see Part B of the Budget, and Part B had three things: HNI tax, excise duty and gold (negative for the markets). (But) Part A talked about capital flows and infrastructure investment. It talked about Rs 10 lakh crore (of investment), not all that money will come from the government. It talked about flows, private sector participation, letting the animal spirits drive things, and how they will drive also gets defined substantially. I think that takes some time to sink in,” he said.