Uniform guidelines are needed for asset monetisation, say experts

Experts have said that risk mitigation standards and uniform guidelines are needed for the success and effective implementation of the government’s ambitious Rs 6 trillion asset monetisation plan. According to them, the government must prepare standard operating procedures (SOPs) before putting assets of the Centre and states on the block.

The government is working on a Rs 6-trillion National Monetisation Pipeline (NMP) that will put a host of assets, such as gas pipelines and highways, on the block for private sector participation. The Centre is planning a big asset monetisation push where private sector participation is anticipated. The government has also developed a dashboard to monitor the real-time progress of its asset monetisation pipeline and provide visibility to investors.

However, experts believe that there should be some safeguards to give comfort to investors as these assets or projects involve risks.

Standard project guidelines would be essential for the government to engage with large investors for monetisation of assets, said Jagannarayan Padmanabhan, director at CRISIL. “Rollout of a uniform mechanism is needed. Standardisation of documents, too, will make the implementation of NMP faster,” said Padmanabhan. “This would be essential as large investors will be keen to engage for national-level assets, but international investors are cautious about bidding for state assets due to varying practices in different states,” he added.

Monetisation of assets would happen through multiple entities, and investors would like to have a uniform set of guidelines across states and the Central-level entities, Padmanabhan said. “The government should specify broad contours of the process, and there should be risk mitigation factors such as state-level guarantees, market and payment risks that must be finalised after holding extensive consultations with potential investors,” he added.

Even as uniform guidelines are brought, there should be uniformity in mapping of asset classes held or owned by various government ministries and states, said Sandeep Shah, managing partner at N.A. Shah Associates. For instance, a single approach should be followed for monetising a block of land across the country, Shah said. This will ensure that there are no challenges in development of a land by the new buyer even if it involves multiple permissions for its use, he added.

“This approach will enable the government to have effective dialogue with state governments and other ministries in charge of various approvals, such as environment clearances, among others,” he said.

D. K. Srivastava, chief policy advisor at EY India, said proper assessment of the value of government land holding must be undertaken. A dedicated asset monetisation auth­ority should be set up to manage the entire asset monetisation process, Srivastava said. 

It is important to carry out valuation of land assets to set a reserve price for bidding. Such an authority can hire consultants to carry out the process of valuation, he said.

“A register should be prepared for such assets, and a calendar for selling of these assets should be prepared for auction so that price discovery can take place. All government departments and public sector undertakings (PSUs) should authorise this entity to list out these assets and monetise them,” Srivastava said. 

It would create a one-stop shop for assets, and state governments can also authorise this entity on their behalf to carry out the monetisation exercise, he added.

THE SUCCESS PLAN 

• National Monetisation Pipeline (NMP) to include a range of assets such as gas pipelines, national highways, toll-operate-transfer, operate-maintain transfer projects, real estate investment trusts 
• The national asset monetisation pipeline framework has been prepared by CRISIL Infrastructure Advisory that lays out the target for states and the Centre
• Central ministries have been given a target of Rs 2.5 trillion for monetising their assets over the next three years starting 2021-22
• States are being nudged by Centre and NITI Aayog to monetise assets and may be given a target of Rs 3 trillion over 4-5 years