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Monetisation
Monetisation
Monetisation
The project envisions leasing of select government assets like roads, power lines, mines and
stadiums for a specified period, after which the asset will be returned back to the government.
Funds so generated will be invested in greenfield infrastructure. NMP will run parallel to
National Infrastructure Pipeline (NIP) and Gati Shakti programme.
The project envisions leasing of select government assets like roads, power lines, mines and
stadiums for a specified period, after which the asset will be returned back to the government.
Funds so generated will be invested in greenfield infrastructure. NMP will run parallel to
National Infrastructure Pipeline (NIP) and Gati Shakti programme. This coordinated move will
not only speed the infra development but also be the driving force towards creating sustainable
infrastructure and ensuring the seamless movement of goods & services.
In the process, employment opportunities will get generated and ease of doing business will also
get facilitated. The Finance Ministry is reported to be working with other ministries, departments
and state governments to quickly implement these three major reform programmes.
The focus is on supply-side reforms to ease structural infrastructure bottlenecks including cost
reduction instead of merely concentrating on economic normalization. Full support will come
from the fact that the government has continuously been taking meaningful facilitative measures
like economic stimulus packages along with timely structural reforms in various sectors that
would play a pivotal role in India’s economic recovery process.
GST is being reformed to achieve its potential. NaBFID- National Bank for Financing
Infrastructure and Development is being set up to support long term infra financing. The
government is also setting up a ‘National Land Monetization Corporation’. Government is likely
to bring ‘Canada Lands Company’ on board to assist in the operations of this SPV. NMP will be
implemented through relevant changes in existing contractual modes/regulatory regimes as well
as capital market instruments like Infrastructure Investment Trusts (InvITs)/ Real Estate
Investment Trust (REITs). These financial instruments would facilitate investors to invest in
completed real estate and infrastructure assets with a low ticket size and adequate liquidity,
thereby making the plan inclusive.
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PROS include unshackling the unproductive PSUs; boosting investors’ confidence; minimizing
completion risk (roughly 50% of government assets ready for monetization); NMP’s integration
with NIP and Gati Shakti would resolve the historical irritant of delay in project implementation
and optimal utilization of national infrastructure. Bureaucratic silos are being done away with.
States’ participation is being ensured. NMP is not about generating revenues, but about efficient
management and stewardship of public infrastructure.
The government has been continuously taking facilitative measures to make the NMP a success.
Finance Minister has desired multilateral development banks to intensify private sector capital
mobilization for inclusive and green development. Notably, the government’s thinking marks a
historic shift on how India henceforth would be conducting the business of developing
infrastructure. There is even talk of initiating changes in the administrative framework at the
ground level. PM visualizes the initiative to be integrative and transformational.
CONS — Though the monetization programme holds grand promise, experiences of Land Portal
initiative failure, Railway auction debacle and lacklustre performance of disinvestments all paint
a dismal scenario creating doubts about whether the monetization plan would be able to attract
adequate buyers. Executing NMP on such a large scale is bound to face bottlenecks.
Even with the assistance of highly qualified experts, it can become difficult to evaluate which
specific government-owned assets should be leased out first and what benchmarks should be
short-listed for projecting cash inflows for assets, especially when many may be illiquid.
Opposition parties view the programme as a daylight robbery, creating a monopoly of a select
few when the USA, South Korea and China are trying to control monopolies/duopolies.
Monetization policy should have been debated in Parliament. There can also arise legal
challenges.
It is imperative that all infrastructure initiatives get underpinned by a stable and predictable
policy and regulatory framework ideally suited for a liberalized environment. Another imperative
is that the government’s Institutional monitoring mechanism needs strengthening by associating
professionals from Industry Associations/Chambers of Commerce & Industry with it. Trust,
being basic for a flowering of a true partnership, is being repeatedly emphasized by the
authorities. Mindset and thought processes need to shift to the realization that profit-making is
not a zero-sum game that ignores public interest.
Supportive policy measures taken to build the trust are like doing away with the retrospective
provision; PLI scheme which being pro-growth and pro-investment has been received well by
both domestic and foreign investors; Telecom relief measures are being received well and timely
Public-Private Partnership breaching the space frontier at an opportune time when several Indian
and international companies have bet on satellite communications as the next frontier to provide
internet connectivity at the retail level; Forest Act is being amended to ease land availability for
the private sector for use of non-forestry purposes.
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After Air India privatization, the government hopes to close BPCL stake sale and LIC IPO by
March 2022. Contractual frameworks need to consider the state as a partner and not sovereign.
This will also require the government to tread cautiously on separating its regulatory role from
the asset-owning one. Gati Shakti by bringing together various ministries with a view to remove
the bottlenecks in project implementation would be an enabler towards making multiplier factors
in the vast infrastructure sector work effectively. Besides, the issue of user charges is bound to
come up. Care has to be taken that user charges are kept rational.
The monetization programme is undoubtedly ambitious but not new. Success cases of
monetization in India have been quite a few but these were carried out on a smaller scale like
franchising of the Electricity sector in Bhiwandi, which resulted in a reduction in losses from
70% to 30%. Monetization was also successful in the case of the construction of the Mumbai
Pune Highway.
Asset monetization has been widely successful abroad. What is required is a different
constructive mindset amongst all stakeholders along with greater clarity on the actual terms of
the deals. If basic issues especially pertaining to the valuation of individual assets get sorted out,
the scheme could enjoy mammoth win-win potential. Ultimate success will lie in the quality of
NMP’s execution
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History of Demonetization in India
While the 2016 demonetization was the largest one of its kind in India, but it was not
the first. Let us take a look at the history of demonetization in India:
In 1946, the Reserve Bank of India demonetized 1000- and 10000-rupee notes, as
these were under-circulated at that time.
In 1978, under PM Morarji Desai, the government demonetized 1000-, 5000-, and
10000-rupee notes in order to curb the menace of black money.
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Moreover, not only did this hastily-executed decision lower industrial production, but
it also affected the GDP growth rate. A report by Azim Premji University also
revealed that 50 lakh people lost their jobs since demonetization.