Asset monetization is not ā€˜privatization, the Modi government maintains. The Railway Minister was vehement in claiming that there will be no privatization of the Railways, and the ministry is preparing to ā€˜monetize assetsā€™. Evidence suggests that this is a euphemism for privatizing the public assets in one manner or other. The Modi government does not have the consent of the ministries to monetize the assets. Against their stated wish the cabinet is forcing the ministries to sell the land and monetize the public assets at their disposal by telling a white lie that asset monetization is not privatization. Take the asset monetization plan of Airport Authority. Many airports are already under private control. The Union government got the bid of Keralaā€™s state government rejected to favor Adani. Given below are the details of the asset monetization plan made public by the Union government:

Who will gain from monetization?

The proposed monetization of public assets includes roads, freight corridors and airports. Last week the Finance Minister went on to claim that the policy of asset monetization is a game changer. It is a paradigm shift. No other government chose to take such a step. The selling pitch was that the union government is converting through asset monetization plan the unutilized public assets into economic value. The government will make them productive assets. The Union government would be able to start projects for the modernization and upgradation of the public assets. The nation will be able to garner financial resources for the creation of new infrastructure.

Who will lose?

“Monetize” is however not just a step being taken by the government to turn a non-revenue-generating item into cash, but a step towards converting the land and infrastructure into financial assets that will merely provide financial return to the investor. It will have to be kept in mind that the asset did not lack in public value or that the social value of this public asset is zero to the present generation. The future generation may not even find this asset in healthy condition. The private investor will not be maintaining the asset for its multi-functional value. It is possible that the land chosen for monetization had even greater environmental value which was not recognized by the agencies undertaking valuation.

It is very likely that the valuation exercise will even fail to recognize this due to the lack of participation of people with such knowledge. Monetization is has led to privatization through the process of commodification of services for which the public asset as a public commons accessible to the common people for a variety of uses which have non-monetary value. It is a priceless asset which is fictitiously commodified with a loss which cannot be measured in monetary terms. When a previously free or public asset is turned into a profit centerā€”such as a public road being converted into a private toll way, there is invariably a process of social exclusion too set in place with the monetization of public assets.

What is the rationale behind Asset Monetisation?  

Land comes in the State List of the Constitution of India and without concurrence of the states and sharing the proceeds of monetization with them (the states concerned) the central government may find it difficult to proceed with privatization. Land was acquired for the PSUs by the states and people were ousted and rehabilitated by the states in ā€˜public interestā€™. While the Union finance minister Nirmala Sitharaman has been seeking proactive help from state agencies,  she cannot be arm twisting the state governments in to collaboration. Already the NITI Aayog has given a suggestion that the governmentā€™s asset monetization policy and the drive for FY22 would include the condition that the state governments will have to privatize the state PSUs to obtain grants for the state level schemes.

Because the process of monetization will involve the private investors to get control of land and other forms of assets built with the aim of creating public value the Modi governmentā€™s input will be possibly only the sale deed for land for its economic utilization by private investors in lieu of sharing profits or proceeds. Molishree, the senior research officer (SRO, Asset Monetization, PPP Vertical) with NITI Aayog conceptualises that itā€™s the family silver in which the forefathers invested and the current generation is stupid if it is not yielding financial return and lying idle.

In her view, the private sector participation can unlock the real asset value through innovative business ideas, emerging technologies and positive disruptions. This will pave the synergized path where government is opening these sectors and assets to the private sector in a fair and transparent manner and the other party has the opportunity to create a profitable venture and provide quality service to the public. The bidding process needs to be structured correctly to achieve a win-win scenario for all; the government, the investor and the public. Monetization has several underlying benefits. The rationale is that since government funding is limited and banks have already burnt their hands in infrastructure lending, and participation of private sector is inevitable to meet this financing gap.  But the track record of the private investors, be foreign or domestic is very different. As these investors have created the NPAs of the banks and they are merrily going on with their business, it is beyond comprehension that asset monetization can offer a respite.

Asset Monetisation is also Privatisation

While the earlier attempt to monetize public assets initiated first in 1993 to monetize unutilized and surplus land assets, had come a cropper following resistance by state governments, the state governments wanted a share in the reuse of such land for development in the concerned areas. The Union Government had insisted that proceeds of monetization should go to the national kitty. Finally the proposal to monetise strategic defense cantonment land, strategic major port land and air space on railways was put in cold storage on security grounds at the instance of Ministry of Home Affairs (MHA). A restaurant on rooftop (air space) of Churchgate station in Mumbai, started by the then Railway Minister Madhavrao Scindia in 1986 by a private enterprise was dismantled after three years following advice of the MHA. Ministry of Railways, however, monetized part of its unutilized land in Mumbai and Ministry of Surface Transport part of similar strategic land of Calcutta Port.

No progress occurred in the monetization drive although Ministry of Railways went ahead and set up the Railways Land Development Authority. Indian Railways have 47,000 hectares of sub-optimally used/unutilized/surplus land and idle airspace. It is still understandable if its monetization can go ahead within the frame of its futuristic requirements for expansion, upgradation and modernisation. But the Modi government has an ideological position as well as a declared policy to privatize the PSUs and the Railways. Although enough thought has not been given on how the state governments will navigate these challenges, but one has a suspicion that the Modi government can bully the state governments and agencies if the people are not mobilized and involved in the social audit of the valuation exercise underway at the moment in the government.

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