National asset monetisation policy: Tamil Nadu FM says no interest in asset sale for foreseeable future

The central government this week finalised a new policy to monetise its brownfield infrastructure assets for financing various new infrastructure projects.

The policy listed out plans of leasing old assets such as roads and ports and transmission lines and will use that money to fund new projects. What has been less discussed so far is from the angle of states. Part of the grand asset monetisation plan is to incentivise state governments to follow suit. States will get matching funds if they completely disinvest in a state PSU.

They get 50 percent of the funds they realise on listing a PSU on a stock exchange, and they get 33 percent of the money they realise if they lease an asset.

Palanivel Thiaga Rajan, finance minister of Tamil Nadu, spoke to CNBC-TV18 about the government’s view on national asset monetization policy. Tamil Nadu is also in the news because it has just announced its budget and the state is also going to move a new bill to exclude it from the National Common Medical Entrance (NEET) exam.

He said, “As far as Tamil Nadu is concerned, we are not in this mode at all. I think I've had this conversation multiple times before. Unlike the Union, Tamil Nadu actually has very easily 'liquidatable' valuable assets. But as I've said multiple times before, my concern is not as much about money or liquidity, as it is about the structural soundness of how the government operates."

"I have detailed the decay in a white paper that we released on August 9, and explained how there are such structural problems and weaknesses, at least quantitatively, and that's built-up problem. I will go one step further and say that in an ongoing operational problem, I don't have the comfort that we are able to execute the intent with which we spend money in terms of getting it out at the end,” he added.

He said, "Many have pointed out when we gave the Rs 4000 ration card in two tranches of Rs 2,000 and fulfilling our election promise, not a one or two, but several instances of wrongful delivery of that money happened, we don't have good enough data to know who should be the real beneficiaries, and those roles have not been cleaned up."

“My primary concern is that I want to fix the system to some level of stability, the platform, the quality of the data, the checks and balances, the audit parameters, and then we can worry about how and what we need to raise. So for the foreseeable future, we have no interest in any asset sales, even though we have easily liquidatable assets, unlike what the Union has just described in the Honourable Finance Minister’s statement yesterday,” Thiaga Rajan added.

However, he clarified, “Earlier in the year between January and March, there has been some contact from the Union Government asking if there are things that you would be willing to list under this programme and some response were sent but it was clearly not a policy decision. The finance secretary was not a party to it. Even the old finance minister was not a party to it. And after that, we have had an election and regime change. So I don't want to deny the fact that there had been some communication. So should you find it that is the explanation?”

The NITI Aayog CEO said that 26 nodal officers were appointed in various states. So, one assumed that Tamil Nadu also had a nodal officer interacting with the central government.

Thiaga Rajan said, “This is an example of the kind of failure of systems that I'm talking about. Surely a major policy decision, like whether something should be sold or not sold, or whether we are in the disinvestment game, should have been taken with the input of the political leadership – we are a democracy, nodal officers as IAS officers don't get to make such important decisions based on their perceptions.”

He said this is one of the ways how the system fails – there is not enough connectivity between the people elected by the citizens who are elected to do this job, and the mechanics of how these things work. "These are some of the things we want to fix," he added.

Sitharaman also said that they have set aside Rs 5,000 crore this year itself and a larger amount last year, whereby they want to provide matching funds to the state governments, provided it is used for capex and disinvestment. So when asked if even last year, they were not a party to it and not willing to disinvest, Thiaga Rajan said, “No, no, it was not even disinvestment, the terms of the loan are relatively, I won't say onerous, but relatively strict for relatively little money. They are long-term loans of relatively by our standards, little money, our allocation would have been the maximum of something like Rs 500 crore out of 3 lakh crore and the budget that we are looking at. And it was a long-term loan, with no ability for early repayment, and some other things that would bind us.”

“This Union government for the last two, three years, I started invoking the, Section 293 of the Constitution that we cannot borrow externally without their pre-approval as long as we owe them money. So, the cost-benefit trade-off of taking such small loans for such long terms without any option for early repayment, and with the additional conditions that it would involve, just didn't make sense, even to the previous government. And so, we are continuing that policy, we are not going to avail of any of that ourselves,” he added.

Thiaga Rajan specified, “I'm not casting any aspersions. I'm just saying that based on the available data to us, it didn't make sense to us. And we didn't do it. They may have done it for different reasons. I don't know I don't want to cast aspersions on others' motives.”

When asked to comment on the one nation one ration card since Tamil Nadu has a fairly decent ration card system – PDS system, he said, “In general, I'm against this rationale for homogeneity as the basis of raising standards. The homogeneity will lower the standards for some people like us. There's a bigger problem in Tamil Nadu, we have seven types of ration cards, depending on the economic status and depending on what they get for free, what they get for cost. Now, if we get one nation one ration card, what does that mean? Do we have to give seven types of non-Tamil Nadu ration cards?”

He said, in Tamil Nadu, they supply rice and kerosene and sugar and some stuff and in Uttar Pradesh they supply wheat because most people eat wheat.

"So if I show up with Tamil Nadu card in Uttar Pradesh, will they have enough rice to give me vice versa when I show up in Tamil Nadu and Uttar Pradesh, will we have enough wheat supplies to deliver -so there are all these complexities?"

“It is overly simplistic to say one nation one ration card, I pointed out at the GST Council that I attended after saying one nation one tax, and the honourable Union Finance Minister was a bit reprimanding of me when I said something about small state, about 20 minutes later, six different states said we are a small state we cannot sign up for the ease of doing business of allowing small below five crore members to file, only have to pay only every three months, we cannot manage liquidity risk. So that is the reality of the world."

The reality of the world, and the condition vary based on ones' economic situation, size, scale, the nature of taxpayers, the nature of the industry, etc. So this attempted homogenisation for the sake of homogenisation has serious negative consequences that people need to understand, he explained.