National Asset Monetization or Backdoor Sale? | Akash Banerjee - YouTube

Finance minister Nirmala Sitharaman recently launched 6 lakh crore national monetiZation pipeline or NMP...

In four years time, assets across various sectors - Power, road, railways, etc. will be "monetized" with private participation.

Nirmala Sitharaman clarified that they won't be selling Govt land.

But wait, how come we have "assets" if no good ever happened in the last 70 years?

Something that will yield 6 lakh crore just by leasing out or long-term renting...

Meaning, Nehru did do some good?

Jokes aside, what is asset monetisation? Is it privatisation?

Let me explain by LEGO.

The attempt is to invite private sector to manage existing assets on a long-term lease.

Basically, these are our assets, suppose.

We won't sell but simply hand them over to private players to manage.

10 or 20 years down the line, the private player might invest more into the assets and reap profit.

After some time, the asset will return back to government ownership. So, not selling.

But why this step?

Disivestment has already failed to take off this fiscal year. We made an episode on this topic...

That instead of selling non-core public sector, the government was trying to sell core, profitable sector.

Ultimately, money matters.

And the government is optimistic...

"Paisa hi paisa."

Important to know that NMP is different from privatisation.

Like, road. The private player might operate toll, for example, and then return the asset back to government.

Similarly, transmission lines including BSNL and MTNL towers...

Or, warehousing assets.

Central government has also encouraged state governments to try to privatize their own assets.

If a state government divests, the center will provide 100% matching value of the divestment.

Likewise if a state lists a public sector, the center will give 50% of the amount raised.

Finally, if a state monetizes an asset, the center will give 33% of the amount.

So, it's a push towards privatization, one way or the other.

And, it is promised that the money garnered won't be used for campaigning or populist projects...

But under national infrastructure pipeline which is about a 100 lakh crore project.

So, the money will be utilized for development of infrastructure, which is very good for the country.

The idea is really nice, at least on paper. To take infrastructure investment forward.

Think about it, if you have an extra room you will rent it, right?

In economic terms, this is called asset utilization.

Renting extra room is a fine example of asset utilization proposal at a national scale.

But it's believable on paper. Because there are challenges too.

6 lakh crore is a huge amount after all...

Several problems on economic, historic and societal levels. Like, trust deficit.

Private and public partnership model has not worked in the past. Railways, for example, failed to attract private players.

Will it work this time?

Which private players would be interested? By the way, we are talking 1000s of crores of rupees.

So, who will be willing to invest that much amount and still not own the asset?!

Meaning, the private player will splurge on the asset and its operations, and deal with the government as well?

Anyone who has been to a passport office knows how tough it is.

First few cases of asset monetization will decide how it goes.

Second concern is implementation.

The ideas of Make in India and GST were excellent but the implementation not so much.

In the case of asset monetization, independent regulator would be must.

But due to incessant need of interference, there are no independent systems and structures to manage such large scale projects.

Let's not forget Cairn energy and $1.7 billion arbitration and the debt to be paid.

So, this is point to be noted.

Important to know why is NMP being done? Because disivestment has failed.

There is no happy news regarding center's 1.75 lakh crore disivestment plan after 2 years.

Today, 6 lakh crore gives hope. But two years ago, cabinet committee of economic affairs, chaired by the prime minister...

Approved disivestment of Air India in Feb 2019 and 5 major public sector disivestment were announced including BPCL, SCI, CCI.

Is the delay due to pandemic?

Fact is, government managed to reach only 10% target.

Another problem is political, as stats predict potential unemployment.

Aim of PSU is not just profit making but also public welfare and employment.

Disinvestment will lead to loss of quota jobs after private handover.

Talking about central PSUs data:

More than 9 lakh employees in CPSUs, out of which 1.6 lakh from SC background, 1 lakh from ST and 2 lakh from OBC category.

Disivestment might lead to loss of quota jobs.

Finally, if all problems sorted, one still remains...

Ambiguity on revenue streams.

Let's say there won't be governmental interference after handover but is there potential to earn 6 lakh crore?

All these assets are valuable, no doubt. But is there genuine demand?

How much can be earned from the existing assets?

Let's wait before we say: "All Izz Whell".

The announcement might be perceived as the king, but implementation is the actual key to success.

This is a good idea. Let's hope it is implemented well, and our assets are fully utilized under this scheme, so that we can become 5 trillion dollar economy.

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