Asset monetisation forms key part in new Karnataka infra policy

Bengaluru: The Siddaramaiah administration approved Thursday a new policy that provides a broad framework for the government to monetise its assets for revenue generation.

The State Public-Private Partnership (PPP) Policy for Infrastructure Projects - 2025, approved by the Cabinet, will be applicable to 15 sectors such as agri-infrastructure, education, energy, healthcare, tourism, housing, urban infrastructure, telecommunications, forestry/wildlife among others.

The new PPP Policy replaces the one approved in 2018. Inclusion asset monetisation is among the new aspects in the 2025 policy, making it the first formal pronouncement of the government’s intention to generate revenue from its properties -- land, buildings, pipelines, roads and so on.

Fiscal pressures created by the flagship ‘guarantee’ schemes and ballooning revenue expenditure has forced Chief Minister Siddaramaiah to look at asset monetisation to mobilise additional resources.

In August 2024, the government constituted a committee under retired IAS officer KP Krishnan to explore various resource mobilisation options, including asset monetisation. "Krishnan‘s work is going on and it does not stop with this PPP policy," a source said.

The policy defines asset monetisation as “a limited period license/lease of an asset owned by a department or government agency to a private sector participant for an upfront or periodic consideration or a combination of both.”

The policy requires government departments and agencies to identify existing assets that can be made available for monetisation based on infrastructure and funding needs. “Asset monetisation involves the creation of new sources of revenue by unlocking the value of hitherto unutilised or underutilised public assets,” it states.

“Promotion of private investment has been high on the government’s agenda. However, infrastructure challenges remain large and require public investment to encourage private investment,” the policy states, adding that it wants to increase the quality and quantity of infrastructure through a multi-year action plan.

Asset-based support

The policy promises asset-based support as an incentive for the private sector to take up infrastructure projects. The asset-based support involves providing government land at concessional lands.

“Wherever an infrastructure project by itself is not financially viable, the government may provide incentives to the private sector participant (PSP) as part of the concession and allow (development of) suitable commercial activities to ensure a reasonable composite internal rate of return,” the policy states.