Need to hasten the rollout of Rs 6 trn asset monetisation plan

Do we have plans in place where these assets have been identified and the route and pricing decided so that the NMP can be set in motion is the moot question

After a hiatus in policy announcements, the government has come up with a rather cogent National Monetisation Pipeline where several assets coming under different ministries are to be sold to the private sector. Not really sold, but leased as the asset would go back to the government after a period of time. Hence, roads, power, telecom, oil and pipelines, railways etc. would see several such monetisation plans for a sum of Rs 6 trillion over 4 years with Rs 88,000 cr this year. 

In such a situation, there would be two main approaches. One where there is a PPP-like approach where the private party leases the asset, be it a road or a railways station or route and earns money from the same while paying the government the rental. The asset remains with the government. The other is through the capital market where a mutual fund-like InvIT is issued like was done by Power Grid Corporations through a SPV and the units are held by the public. There could be other options, but the focus will be these two route. 

On the face of it, this is a great idea. The government spoke of it in the Budget and getting in Rs 88,000 cr this year will be a bounty given the state of finances. The question is how soon this will begin and are there plans in place. The problem with any asset sale or lease as is the case today is that the timing has to be right. The stock market is on a roll and ideally the ambitious disinvestment programme should have been on the way. But the bureaucratic processes come in the way and we have not seen much action on this front with 5 months passing. Here we are talking of 2 PSBs and an insurance company being divested. Do we have plans in place where these assets have been identified and the route and pricing decided so that the NMP can be set in motion? 

The second issue with the PPP is that this has been tried in roads with different kinds of results. Now we are actually talking of such arrangements in new areas like pipelines, power, mining etc. Both sides of the deal- the government and the private party have to be in agreement with the terms of engagement. It will be interesting to see as to how much of this will be lapped up by the private sector. There has to be interest shown by the private sector as the asset will never be owned by them as the government has made this clear. 

The third challenge will be the appetite of the market. There is already a large part of PSU shares, which should be coming into the market. This goes with the large volume of IPOs that have been raised by the private sector. Will there be enough money to support these monetisation plans? While there is a mad rush to the capital market given the abysmal returns in the fixed income space, the prospects for REITs for example have become a bit dull given the state of the real estate market. The same could be the challenges for some of the InvITs being raised for other sectors. 

The approach taken by the government is quite unique where the NMP becomes a part of the financing plan for the National Infrastructure Pipeline. As resources are scarce it is essential for the government to explore all options, and the NMP fits the bill. The main challenge is getting this in motion and maintaining the momentum over the next 3 years or so. With the resolve shown by the government this should be possible, the challenges notwithstanding.

The author is Chief Economist, CARE ratings and author of "Hits & Misses: the Indian Banking Story".