Monetizing assets is a brilliant government initiative. What could be better than creating value through the efficient use of “dormant assets” which accumulate dust and rust. With the exception of the die-hard Communists, most of whom are irrelevant anyway, and those for purely political reasons, no one would or should oppose such a move. The key question is whether this will happen?
Before getting into the operational part, let’s first look at the conceptual level. Details available so far indicate that assets held by central public sector companies and other central entities will be leased. This was probably done to make the idea politically acceptable, to assert that the property should remain with the original owner. However, this is likely to have an impact on the whole process. First, the true value of the asset will not be realized. Renting 25-30 years is as good as the missing asset, but the tenant will never feel like they own the asset. Therefore, it is likely that he is not offering the amount that he would have had if the property had been transferred. Second, it is likely to lead to “asset stripping,” a notorious term that was used when the oligarchs grabbed assets in Russia. The lessee will have no interest in maintaining the asset beyond the rental period and therefore will remove all the asset to render it unusable after the rental period. Therefore, it would have been much better to sell some of the assets outright.
The other question concerns building stakeholder confidence. Apparently NITI Aayog, very good at data processing and presentations, prepared the document for asset monetization. Have discussions taken place with the companies who would ultimately have to pay out all the money? This apparently has not been done. If this had been done, more realistic figures would have been announced. NITI would also have benefited from industry input as past experience with PPP models or divestment has not been very encouraging. The most critical stakeholders in the whole process are states. All actions are in the United States. If they are not taken in confidence, there could be serious problems on the ground. The success of the coal block auctions and the unprecedented increase in coal production during the period 2014-16 is mainly due to the commitment of the states. The trade union movement is almost dead in the country. Most unions would oppose this initiative, but it would still have been worth engaging with them. Agricultural laws have made it clear that if stakeholders are not given confidence, even well-intentioned initiatives can run into problems.
The design of the tender documents will have to be done carefully to obtain the best value but a delicate balancing will have to be done so as not to drive out the bidders. A lot has happened in this context during the 3G and coal block auctions.
At the operational level, even more complex problems will have to be solved. The problem in government is that everyone (from PMO to the bottom) likes surveillance. I clearly remember the pressure exerted by the PMO in 2014-2016 to watch, watch and watch. I resisted and developed a facilitation mechanism whereby an attempt was made to understand and appreciate the issues at each level and help with problem solving. It is difficult, time consuming and requires discussion not in Delhi but on the ground. Much to the dismay of the PMO, not a single “review and follow-up” meeting has taken place in Delhi. It worked. Coal production reached a level where not a single power plant was critical for lack of coal. We even cared about the idea of exporting coal to Bangladesh. The experience of the Project Monitoring Group (which facilitated the clearance of over Rs 5 lakh Crore of projects) helped. I am informed that the PMG still exists and is part of the PMO (previously it belonged to the Cabinet Secretariat) but is dormant. PMG will need to be relaunched in letter and spirit if asset monetization is to take place.
As mentioned earlier, asset monetization will not happen in Delhi. Many of the problems that beset these strengths will be on the ground. They could relate to valuation, encroachment, unions, those who deal with these assets, directly or indirectly, etc. Teams will need to go to the field to have in-depth discussions and resolve these issues. These can lead to negotiations. The teams must be empowered and protected. What happened in the so-called coal scam when everything was considered tainted and the officials tracked down without any wrongdoers could act as a shock absorber.
The biggest problem would be the confidence of the industry. When a senior cabinet minister announces that “the practices of the industry are against the national interest”, that does not send the right signal. The industry is also reeling from COVID. Therefore, they should be treated as partners in this journey and not as adversaries, certainly not anti-national. Confidence can be restored through intensive engagement with industry organizations. As organizations, they would also be able to guide the government on how to make asset monetization a success. Vinayak Chatterjee, a man who knows a bit about infrastructure and has enormous experience in managing public-private partnerships, has publicly stated that “unless past PPP issues are addressed, rectified and addressed head-on, we will see difficulties in the implementation of PPP formats across a strip of new assets ”.
Finally, there is concern that the monetization of assets will lead to monopolies / duopolies / oligopolies. These fears are based on the events of the recent past. First of all, it will have to be avoided by the tendering process itself. At the same time, a regulatory mechanism will have to be put in place. Even capitalist countries have such mechanisms to protect the interests of consumers.
It is a long way for the government to go and the hope is that this pipeline will not become another pipe dream.
–Anil Swarup is the former secretary of the Indian government and author of the book “Not Just A Civil Servant”. The opinions expressed are personal.
(Edited by : Anshul)
First publication: STI