Monetise for efficiency, not revenue

Key to success is honest, efficient implementation

The National Monetisation Pipeline (NMP), announced by Finance Minister Nirmala Sitharaman, provides a roadmap for raising resources to build infrastructure. It is a major programme, aimed at raising Rs 6 lakh crore in the next four years by monetising government assets through contractual partnerships with private players for a limited period. These assets are in areas like the railways, roadways and power and would include highways, transmission lines, hydro, solar and other power projects and trains and stations. They cover 20 asset classes and 12 ministries. The ownership of the assets will remain with the government, and so the programme is different from disinvestment or outright sale. The projects are only being leased for four years. Family silver is not being sold, but is being pawned for a productive purpose.

There are concerns about the extent of the programme, how it will be executed and whether the funds gained from it will be productively deployed. There are also fears that important assets will go into the hands of a few favoured private players, creating monopolies and attendant problems. The government has promised transparency in the implementation of the programme, but government structures are generally not known for transparency. The money raised through the plan is supposed to be used for infrastructure-building but it may also be taken as revenue, which can be used for any purpose. It is claimed that the programme is not meant to raise revenues alone but also intended for efficient management of public infrastructure. This will be tested. The experiences of countries such as Australia and Singapore that have gone down this path have not been happy. There will be questions about the valuation of the assets. Undervaluation will lead to charges of corruption; overvaluation may result in the deal not going through at all. Generally, the government’s handling of disinvestment has not been efficient. The asset monetisation process has similarities with disinvestment and hence these concerns. No major disinvestment has taken place in the last five months. So, the question whether the bureaucracy will be able to push through the asset monetisation plan in time is not an idle one.

This year’s target is Rs 88,000 crore. There are major fund-raising plans in the market this year and so some doubts have been expressed over whether the market will have the appetite and the ability to fully participate in it. Timing will be key, as the current availability of global liquidity may not last. The monetisation programme is not new and has been tried with success in the past, as in the case of the Mumbai-Pune highway. Importantly, however, the government will have to give confidence to all stakeholders that this is not a plan to merely fill its revenue shortfall.