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.