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Success of monetisation programme will depend on institutional capacity, continuous monitoring

On its part, the Centre has come up with financial incentives to encourage states to follow its lead. But in the current atmosphere of strained Centre-state relations, fructification of such plans would require deft political management.

By: Editorial |
Updated: August 25, 2021 9:01:28 am
The National Monetisation Pipeline involves leasing out central government assets valued at around Rs 6 lakh crore over a four-year period ending in 2024-25, with the government looking to mop up Rs 88,000 crore in the ongoing financial year.

On Monday, Union Finance Minister Nirmala Sitharaman unveiled the broad contours of an ambitious asset monetisation programme. The National Monetisation Pipeline involves leasing out central government assets valued at around Rs 6 lakh crore over a four-year period ending in 2024-25, with the government looking to mop up Rs 88,000 crore in the ongoing financial year. At its core, the idea is to lease out brownfield projects, proceeds from which can be used to finance greenfield projects. The ownership of the assets monetised, though, will remain with the government, with the private players taking on the operational risk. While roads, railways and power account for around 65 per cent of the proceeds of the programme, the list of assets detailed is spread across sectors such as telecom, aviation, mining and warehousing, suggesting a more wide-ranging programme. While the targets are aggressive, a four-year roadmap, providing in detail the assets the government intends to lease, should provide clarity to investors and generate interest. However, considering the regular shortfalls in the government’s disinvestment collections, the programme’s success will require careful and continuous monitoring, and addressing of concerns raised by private players.

The transactions are likely to be structured through either public private partnerships, concessions or instruments such as infrastructure investment trusts (InvITs). However, considering the experience of private players with PPPs, their comfort level in participating in these transactions is likely to depend on a host of factors, such as operational flexibility, regulatory framework, dispute resolution mechanism, etc. To ensure a smooth rollout, some experts have suggested that the government should look at addressing the concerns raised around PPPs. The recent experience of the Indian Railways when it invited private players to run passenger trains has not been encouraging — reportedly, only two players participated in the process, one of which is a government entity. Thus, how these agreements are structured will be central to their success as that will determine the extent of private sector participation. It will require institutional capacity to draft such attractive agreements across multiple sectors and settings.

The central government is also incentivising states to participate in this programme. After all, states, like the Centre, have assets that can be monetised, creating a lucrative revenue stream for them. And considering that states drive general government capital expenditure, this channel could provide them with the additional resources needed to sustain public investment during this period of stressed public finances. On its part, the Centre has come up with financial incentives to encourage states to follow its lead. But in the current atmosphere of strained Centre-state relations, fructification of such plans would require deft political management.

This editorial first appeared in the print edition on August 25, 2021 under the title ‘Managing the plan’.

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