Asset monetisation: Pipeline or pipedream


Monetisation of assets is a brilliant move by the government. What could be better than creating value through efficient utilization of “dormant assets” that are gathering dust and rust.

Asset monetisation: Pipeline or pipedream
Monetisation of assets is a brilliant move by the government. What could be better than creating value through efficient utilization of “dormant assets” that are gathering dust and rust. Except for die-hard communists most of whom are in any case irrelevant and those for purely political reasons, no one would or should oppose such a move. The key question is whether it will happen?
Before we delve into the operational part, let us first look at the conceptual level. The details available so far indicate that the assets owned by the Central Public Sector Undertakings and other Central Entities shall be leased out. This was probably done to make the idea politically acceptable, to posture that the ownership shall stay with the original owner. However, this is likely to impact the entire process. First, the true value of the asset will not be realized. Leasing out for 25 to 30 years is as good as the asset gone but the lessee will never feel that he would be owning the asset. Hence, he is likely not to bid the amount that he would have had the ownership been transferred. Secondly, it is likely to lead to “asset stripping”, a notorious term that was used when oligarchs cornered the assets in Russia. The lessee will have no interest in sustaining the asset beyond the lease period and would therefore strip everything out the asset to leave it useless after the lease period. Hence, it would have been much better to outrightly sell some of the assets.
The other question relates to taking stake holders into confidence. Apparently NITI Aayog, very good at data crunching and presentations, prepared the document for asset monetisation. Were discussions held with the businesses who are ultimately expected to shell out all the money? This has apparently not been done. Had this been done, more realistic numbers would have been announced. NITI would have also benefitted from the inputs from industry as the past experience with PPP models or disinvestment has not been very encouraging. The most critical stake holders in the entire process are the States. All action is in the States. If they are not taken into confidence, there could be serous trouble in the field. The success relating to coal block auctions and unprecedented increase in coal production during 2014-16 was primarily on account of the fact that the States were engaged with. Trade Union movement is as good as dead in the country. Most of the Trade Union would oppose this move but it would have still been worthwhile engaging with them. The Farm Legislations have clearly demonstrated that if the stakeholders are not taken into confidence, even well-meaning initiatives could run into problems.
The designing of the documents inviting bids will have to be done carefully to get the best value but delicate balancing will have to be done so as not to chase the bidders away. A lot has happened in this context when 3G and coal block auctions took place.
At the operational level there will be even more complex issues that will need to be resolved. The problem in the government is that everyone (from PMO downwards) loves monitoring. I distinctly recall the pressure from the PMO during 2014-16 to monitor, monitor and monitor. I resisted and evolved a facilitating mechanism under which an attempt was made to understand and appreciate the problems at each level and assist in the resolution of issues. It is tough, time-consuming and requires discussion not in Delhi but at the field level. Much to the dismay of the PMO, not a single “review and monitoring” meeting was held in Delhi. It worked. Coal production reached a level where not a single power plant was critical for want of coal. We were even toying with the idea of exporting coal to Bangladesh. The experience of Project Monitoring Group (that facilitated clearance of more that Rs 5 lakh Crore of projects) helped. I am informed that PMG still exists and is a part of PMO (earlier it was with Cabinet Secretariat) but is dormant. The PMG will have to be revived in letter and spirit if asset monetisation has to happen.
As mentioned earlier, asset monetisation will not happen in Delhi. Many issues besetting these assets will be in the field. They could relate to valuation, encroachment, trade unions, those engaged with those assets, directly or indirectly etc. The teams will have to travel down to the field hold extensive discussions and resolve such issues. These may entail negotiations. The teams will have to be empowered and protected. What happened in the so-called coal scam when everything was seen as tainted and civil servants hounded without any malafide could act as a dampener.
The biggest problem would be industry confidence. When a senior Cabinet Minister announces that “industry’s practices are against national interest”, it doesn’t send the right signal. The industry too is reeling under the COVID impact. Hence, they will have to be treated as partners in this journey and not adversaries, certainly not anti-national. The confidence can be restored through intensive engagement with the Industry Organizations. As organizations they would also be able to guide the government on how to make asset monetisation a success. Vinayak Chatterjee, a man who knows a bit about infrastructure and has enormous experience in handling Public-Private-Partnership, has gone on record to say that “unless past issues of PPP are sorted out, rectified and addressed head on, we are going to see difficulties in implementation of PPP formats across swath of new assets”.
Finally, there are apprehensions that the monetisation of assets will lead to monopolies/duopolies/oligopolies. These fears are based on the events in the recent past. First of all, it will need to be avoided through tendering process itself. Simultaneously, there will be a need to put in place a regulatory mechanism. Even capitalist countries have such mechanisms to protect the interest of the consumers.
It is a long road ahead for the government and the hope is that this pipeline will not become another pipedream.
Anil Swarup is former Secretary, Government of India and author of the book 'Not Just A Civil Servant'. The views expressed are personal.