GOING ASSET LIGHT – BEST UNDOING

about 1 month ago
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The Govt yesterday announced a huge Rs.6 trillion or Rs.6 lakh crore asset monetization plan. Almost everything of value is being put up on the sale block.

It will be selling off assets in – roads, railways, power generation and transmission, gas pipelines, petroleum pipelines, telecom, warehousing, aviation, shipping, coal, mineral mining, sports and urban real estate.

The Finance Minister has explained that there is no land being sold – it is brownfield assets where investments have already been made or where there is a completed asset, which is either languishing or under-utilised or not fully monetized.

Just to give a quick name to the “assets”

  1. AAI Airports in Tier II and III cities
  2. Oil and Gas Pipelines of GAIL, IOCL and HPCL
  3. Transmission Assets of PGCIL
  4. NHAI Operational Toll Roads
  5. Other Railway Infrastructure Assets
  6. Warehousing Assets of CPSEs such as Central Warehousing Corporation and NAFED among others and
  7. Sports Stadiums

Naturally, there is a major debate brewing with those not in favor saying that the Govt is selling off the country. Then there are others who are talking about Govt making money both ways – using the PPP mode to build roads and Airports and now selling them to the private sector and once again announcing new PPP infrastructure, to be sold off later. Some have called the Niti Aayog as the Govt’s very own OLX platform.

But then if one looks at things logically, you do wonder as to why, when the private sector is so vibrant, does the Govt need be in the business of doing business.

Apart from foreign policy, education, health, internal security, Defence and to some extent, telecommunications, it makes more sense for the Govt to get out of the rest. It’s the job of the Govt to frame policies & guideline, frame laws and monitor compliance in a transparent and corruption-free environment and not run businesses. These are Nehru era companies which had their own relevance but is now a pain for the citizens. They are bleeding at tax payer’s cost and frankly speaking, they are not adding value in the new era of business.

It’s a pipe-dream to say that getting professional management will nurse these companies back. The huge labor force and the overall inefficient way of working can never be overcome and this privatization plan is a good one.

But the moot question is – will there be buyers when they are selling inefficient companies with no land? There is the story of Air-India to consider. Also, the Govt needs to be careful that it does not keep on selling off to one or two players only, making the already powerful monopolies and duopolies into oligarchs richer than even those in Russia! 

The Govt needs to remember that this divestment income is only one time and money raised should be used solely to pay back debt and not be counted against fiscal deficit.

The effective implementation of this measure can change the face of Indian business significantly but will that happen? The four-year target to sell off is pretty ambitious. Making a mere dash board will not be enough. More importantly, will the trade unions allow this to happen?

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