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Opinion: The Monetisation Pipeline Will Be Taught In Schools As An Economic Blunder

The fundamental objective of any policy is not only to establish world-class infrastructure, or to build a vibrant start-ups ecosystem or to attract massive foreign capital. Well, these are necessary for the economy.

But, the most important aspect which needs to be met by a policy is transforming the lives of the people, uplifting people from poverty, and most importantly given the present state of economic affairs in India, creating demand.

On August 23, 2021, the finance minister of India announced the “national monetisation pipeline” (NMP), under which the government aims to collect ₹6 lakh crore (₹1.5 lakh crore every year, for the next four years) via rent, by leasing out the government’s assets and PSUs (public sector undertakings).

Representational image. Photo credit: www.india.com.

The assets which will be leased out are under the domain of roads, railways, electricity, telecom, ports, warehouse, airports, and stadiums.

If we go into the details, the list includes:

  • 26,700 km of roads;
  • 28,698 ckt km of power transmission assets,
  • 6,000 MW of hydel and solar power assets,
  • 8,154 km of natural gas pipelines,
  • 3,930 km of petroleum products pipeline,
  • 2,10,00,000 mt of warehousing assets,
  • 400 railway stations, 90 passenger train operations, 265 goods sheds,
  • Konkan railways and dedicated freight corridor,
  • 2,86,000 km of fiber and 14,917 telecom towers,
  • 25 airports and 31 projects in nine major ports, and
  • Two national stadiums.

By reading the provisions it looks like the most effective plan for this government, but only on paper. The Modi-led NDA (national democratic alliance) government has a standard of incompetence when it comes to the effective implementation of policies.

We, as Indians, have witnessed implementations from this government which has completely paralysed the policies which looked promising on papers, be it in case of demonetisation, and GST (goods and services tax).

And, in this particular case of the NMP, even minute mismanagement on implementation can massively cost India’s growth prospects.

The Devil Is In The Details

There is absolutely no clarity whether the ₹6 lakh crore ($80 billion) is the market value of the assets to be monetized.

But, if it is as per the government’s claim, then the total rental value it can expect from such exercise given normal cutting rates of 45% in such cases (100% return on capital), the government should expect no more than ₹1 lakh crore.

Here, the government is planning to lease out assets worth more than the rental amount the government is expecting to receive. The government should have spelled out what are its criteria and objectives.

The government is planning to get ₹1.5 lakh crore every year, for the next four years.

The finance ministry said that this exercise is to fund the national infrastructure pipeline. This infrastructure pipeline was first announced by the prime minister on August 15, 2019, worth ₹100 lakh crore. Then, it was updated again on August 15, 2020, to ₹110 lakh crore.

This year, it was repeated again on August 15. Now, the worth of the pipeline is ₹100 lakh crore.

So, the PM has announced this three times… Thinking no one will remember! So, the government is collecting ₹6 lakh crore to build an infrastructure worth ₹100 lakh crore. What mathematics is the government doing?. This is a complete scandal that needs to be discussed.

With a fiscal deficit of about 9.4% of GDP (gross domestic product) in 2020, and debt at 90% of GDP in the current year, the finance minister has no option left other than to fill up the government revenue through leasing our assets built over 70 years.

There is absolute vagueness on numbers on this policy, with which the government plans to operate to revive the economy.

What About Welfare? 

There has not been any provision by the government to categorise the assets on the basis of their utilities, revenue-generating capabilities, and on what basis were they chosen to monetised?

There are many assets under the arm of the government which is under utilised due to the low people dependency matrix.

But, such assets still continue to contribute majorly to the employment and welfare of the poorest people of the country, e.g. the railways. When the number of poor in India (with income of $2 per day or less in purchasing power parity) has more than doubled to 134 million from 60 million, in just a year.

The government has not bothered to look at its own responsibility of providing welfare to these people.

Is there any provision or any law being introduced by the government in this new plan, to keep a minimum limit on the investment or on the maintenance of the asset so as to continue the welfare and employment propositions of these assets?

Most importantly, can the government guarantee reservations (for marginalised communities) will continue under this new policy?

The private players will only look at the assets which can drive more value-linked profit propositions on their investments and lastly, at welfare.

Let us understand this with the help of an example. The highway from Delhi to Mumbai is one among the busiest roadway of our country, and certainly attracts more revenue from tolls and other business premises, an eye-catcher of the private players.

And if we compare Delhi to Mumbai highway with Delhi to Lucknow highway, the former has more revenue generation capabilities. But the latter has the adequacy to safeguard the employment and generate revenue for the development of its adjacent areas.

The governments from the beginning have played the role of an invisible force to maintain equality and provided penetrated welfare to the society. Has the NDA government done anything with NMP to safeguard the welfare credentials of our economy?

Where Are The Profit-Making Assets?

During the announcement of NMP by the finance ministry, there was no clarity on what basis these domains were selected for monetisation. There was no proper detailing on what aspects these assets will be monetised.

And, the fundamental question which remained unanswered by the finance minister is that are we monetising the assets or industries, which are profit positive or have the capacity to turn profitable after government intervention?

If yes, then certainly the backbone of our economy will go for a complete toss. The private players are inherited to show interest in assets that are bound to generate revenues with minimum or zero investments.

It will be a blunder on part of the finance ministry to lease out such assets to private players which could be managed properly and can be turned into profit-generating establishments.

If this happens then the entire objective of the government will collapse. Such assets could be used by the government to generate employment, to inject direct demand into the economy. Not to mention, it could introduce investments to encourage other industries to follow suit.

The Vicious Circle Of Time

The most nonsensical thing which the government has done which will surely prove to be ignominious is that there are no objective-based reasoning to lease out assets for 25 years, or in some cases more than 25 years, without any legal framework to guarantee the safe and sound state of the asset after the proposed tenure.

If the assets are leased out to private players without any legal framework to protect the utilities of the said assets. The exercise will result in tremendous wear and tear of the public property. This is a very general concept of an owner versus renter.

A legal framework should have been there to protect the assets built over 70 years with the sweat and blood of Indians. Do we have any mechanism to hold the private entity responsible if after the said stated tenure the condition of the asset, particularly profit-making asset depreciates?

If no, then this policy will prove as the last nail in the coffin of the Indian economy.

Heading Towards Another Modi-Made Blunder!

There is not even a single economist in India apart from bureaucrats working in this mysterious organisation called NITI Ayog, who believes that this plan can help revive the Indian economy. Many developmental experts are suggesting that the only way this policy can work is if the government has robust regulations and complete transparency.

The former may prove a disaster for private players, as the private sector in India is not happy with the effective regulations. It may have the potential to restrict the profit and growth premises of the private players.

It may also lead to hurdles in the process, proving as an obstacle in receiving further investments, and eventually turning it into a complete state of paralysis.

About the latter, this government has made a name for itself on the face of the earth when it comes to dismantling transparency, hiding official facts and figures (remember, we still don’t have the official count of doctors who died saving us from Covid-19, as per the response to a question asked in parliament), deviating from the agendas, and creating narratives with the help of their mouthpieces.

A frontliner tests a villager for Covid-19 in Rajasthan. Representational image. Photo credit: IMPRI.

This policy is by no means addressing the immediate concern of the economy. The economic cycle in India can only be put back on track by encouraging the demand. Infrastructural investments are only there for the next 40-50 years. Such investments do not have a multiplier effect on demand.  Which the government should understand before it’s too late.

Overall this policy has no means to an end. It will prove disastrous, a vicious circle of 25 years operated by few monopolies with no social security.

By implementing this policy, India, unfortunately, will witness massive job cuts, unbearable inflation, and the emergence of monopolies which can one day get bigger than the state.

Featured image is for representational purposes only.
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A former Assistant Secretary with the Ministry of Women and Child Development in West Bengal for three months, Lakshmi Bhavya has been championing the cause of menstrual hygiene in her district. By associating herself with the Lalana Campaign, a holistic menstrual hygiene awareness campaign which is conducted by the Anahat NGO, Lakshmi has been slowly breaking taboos when it comes to periods and menstrual hygiene.

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