The National Monetisation Pipeline (NMP) envisages an aggregate monetisation potential of ₹6-lakh crore through the leasing of core assets of the Central government in sectors such as roads, railways, power, oil and gas pipelines, telecom, civil aviation, shipping ports and waterways, mining, food and public distribution, coal, housing and urban affairs, and stadiums and sports complexes, to name some sectors, over a four-year period (FY2022 to FY2025). But the point is that it only underscores the need for policy makers to investigate the key reasons and processes which led to once profit-making public sector assets becoming inefficient and sick businesses.
To unlock value
Eight core industrial sectors that support infrastructure such as coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity have a total weight of nearly 40% in the Index of Industrial Production (IIP). According to NITI Aayog, the strategic objective of the asset monetisation programme is to unlock the value of investments in public sector assets by tapping private sector capital and efficiencies. The NMP policy advocates unlocking idle capital from non-strategic/underperforming government owned assets and reinvesting the funds, thus received, into new infrastructure projects and augmentation of assets such as greenfield infrastructure creation.
This reportedly first-of-its-kind initiative claims that it will boost the economy, generate better employment opportunities, and drive the competitiveness of the Indian economy.
Notwithstanding the merit of this decision by the government of the day, it becomes imperative for policy makers to introspect the decline of profit-making government assets in the backdrop of the Government contemplating reinvesting the funds received to create fresh assets, post the NMP exercise. It is quite likely that the nation may find itself in a vicious cycle of creating new assets and then monetising the same when they become liabilities for the Government at a later stage.
Going by the annual report (2020-2021) of the Department of Public Enterprises, Government of India, there are 256 operationally-run central public sector undertakings (CPSUs), employing about one million people; they posted a net profit of ₹93,294 crore (FY 2019-20). Out of these, 96 have been conferred the Ratna status (72, 14, and 10 are Miniratnas, Navaratnas, and Maharatna companies, respectively).
As India needs to invest about $1.5 trillion on infrastructure development in order to aspire to become $5 trillion economy by the year 2024-25, according to the Economic Survey 2019-20, public enterprises should be in focus.
Some reasons for PSU decline
The primary reasons for the failure of public sector enterprises is no secret. Cost overruns, inter alia , is one of the major reasons. In some cases, project completion time is exceeded, leading to elevated project cost so much so that either the project itself becomes unviable at the time of its launching or delays its break even point. Besides, optimum input-output ratio is seldom observed in a majority of government infrastructural projects leading to their overcapitalisation. A reluctance to implement labour reforms, a lack of inter-ministerial/departmental coordination, poor decision-making, ineffective governance and excessive government control are other reasons for the failure of public infrastructural assets.
Recently, the “Pradhan Mantri Gati Shakti National Master Plan” for multi-modal connectivity was launched by the Prime Minister with an aim ‘to synchronise the operations of different departments of 16 Ministries including railways and roadways for seamless planning and coordinated execution of infrastructure projects in a timely manner’. It is essentially a digital platform for information sharing among different Ministries and departments at the Union and State levels. It also entails analytical decision-making tools to disseminate project-related information and prioritise key infrastructure projects. Besides, it fosters a periodical review and monitoring of the progress of cross-sectorial infrastructure projects through the GIS platform in order to intervene if there is a need.
In addition to it, as enunciated in the Economic Survey 2020-21, an important step for the Government to take to strengthen public sector businesses would be to completely revamp their corporate governance structure in order to enhance operational autonomy augmented with strong governance practices including listing on stock exchange for greater transparency and accountability.
The Department of Public Enterprises has reportedly initiated revamping of the performance monitoring system of central public sector enterprises to make them more transparent, objective and forward looking, based on sectoral indices/benchmarks.
The Economic Survey also highlights the Government’s initiatives as part of the Atmanirbhar Abhiyaan (campaign for self-reliance) in order to boost domestic production in the steel sector, viz . inclusion of “speciality steel”, recommending four different types of steel for incentives under the production linked incentive (PLI) scheme; selling steel to Micro, Small and Medium Enterprises (MSMEs), affiliated to Engineering Export Promotion Council of India at export parity price under the duty drawback scheme of the Directorate General of Foreign Trade (DGFT); measures to provide preference to domestically produced iron and steel in government procurement, where aggregate estimate of iron and steel products exceeds ₹25 crore; protecting industry from unfair trade through appropriate remedial measures including imposition of anti-dumping duty and countervailing duty on the products on which unfair trade practices were adopted by the other countries.
Comment | A monetisation move that doesn’t tick most boxes
More such out-of-the-box policy initiatives are needed to rule out public asset monetisation schemes such as the NMP in future.
Milind Kumar Sharma teaches in the Department of Production and Industrial Engineering, M.B.M. Engineering College, Faculty of Engineering and Architecture, Jai Narain Vyas University, Jodhpur, erstwhile University of Jodhpur. The views expressed are personal