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‘Monetise or modernise’ is Modi’s mantra for govt. assets

Topics Covered: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

‘Monetise or modernise’ is Modi’s mantra for govt. assets:


Context:

Prime Minister Narendra Modi has urged foreign investors to tap investment opportunities thrown up by the government’s decision to privatise most public sector entities and monetise ‘unutilised and underutilised assets’ such as airports that have an estimated investment potential of ₹2.5 lakh crore.

Need for:

Public assets such as roads, railways, airports, power transmission lines, shipping terminals, pipelines, mobile towers and other land and building, financial assets, e.g., shares, securities and dividend payouts attached with these are spread throughout the country. They are controlled by departments of Central Government, Public sector units or the respective State Government where the asset lies geographically.

Many of these public assets are sub-optimally utilized or are unutilized; which simply means that it is not using its maximum potential which could have been gained by exploiting it commercially at a market valuation.

  • Therefore, speaking the economics way, a government owned asset deriving a net value of Rs 50 crore but having a potential to earn Rs 500 crore will also be termed sub-optimally utilized. Only if we talk about vacant land parcel; it is very huge.

What are the benefits?

  1. The funds raised from the exercise will help empower citizens by building homes for the poor and ensuring clean water reaches all.
  2. This policy goes beyond annual disinvestment targets, to a medium-term strategic approach. This will help create new investment opportunities for industry in every sector.
  3. The private sector can not only bring capital but also introduce global best practices and quality manpower and modernise enterprises.

Challenges:

  1. This is a sensitive decision-making process that needs to take into account the correct valuation of the assets in question, the future infrastructure needs of the country and the private sector’s ability to fulfill the targeted objective.
  2. Equally important is the willingness of the citizens to accept management of public infrastructure in the private hand.
  3. Their grievances; if any needs to be promptly attended to by the operating private player. Otherwise one wrongly gone PPP experience may cause long lasting damage to public perception.

Dialogue is an effective way to build strong public support and dispelling doubts created by a few vested interests.

A successful monetization demands a four step process.

  1. First, the motivation of the policy formulating government should be understood.
  2. Second, a detailed analysis of assets (both operational and financial) is needed.
  3. Third, analyzing the current and future potential of assets.
  4. Fourth, carefully managing all the stakeholders and executing the project with care to deliver the envisioned objective.

Sources: the Hindu.