‘Deccan Herald’ reports that the Railways has ‘been able to achieve only a lower single-digit percentage of its goal.’
New Delhi: The Indian Railways is unlikely to meet its asset monetisation targets for the four-year period ending 2024-2025, Deccan Herald has reported.
The NITI Aayog-developed ‘National Monetisation Pipeline’, brought in 2021-22, estimated an aggregate asset monetisation potential of Rs 6 lakh crores through core assets of the Union government, over a four-year period, from FY 2022 to FY 2025.
Among the top five sectors in focus were the Railways, which aimed for the second largest target – 25% of the Rs 6 lakh crore or Rs 1.52 lakh crore.
The report quotes sources as having said that the current realisation remains “short of aspiration at Rs 20,000 crore per year.”
“Figuratively, it managed asset monetisation of around Rs 30,000 crore against the target of Rs 57,222 crore in FY23,” the report says.
The report notes that the Railways had planned to redevelop 400 stations, privatise of 90 trains and 15 railway stadiums. In fact, development of stations is a significant part of monetisation plans, over 50%.
The report also has it that according to the NITI Aayog, the government has monetised assets worth Rs 26,000 crore during FY24 against the target of Rs 1.6 lakh crore for the current fiscal.
Former senior officials at the Railways told DH that the sector has got a bit of a leeway from the government and that other sectors have done better. The Wire has reported how the mining industry – which is one of the core industries of the economy – has been making up for the poor show of the Railways.
In January this year, Financial Expresshad reported that the Railways, telecom and petroleum sectors are unlikely to meet their targets.
In 2021, in an interview to The Wire, former finance minister P. Chidambaram had noted that the NMP brought with itself concerns on corporate favouritism, rising costs for users and handing over strategic assets.
Meanwhile, the Comptroller and Auditor General report on the Union Government, (Railways) Railways Finances, presented to the parliament this monsoon session revealed that the Indian Railways could not generate a net surplus during 2021-22 as compared to 2020-21. It also found that the Railways incurred an additional expenditure of Rs 7,778.43 crore more than the sanctioned budget of Rs 5,7626.20.
While the railways and telecom accounted for half of the asset monetisation target for the current fiscal, they emerged as the worst performers, along with the petroleum sector.
New Delhi: The Union government’s ambitious asset monetisation plan under the National Monetisation Pipeline (NMP) may miss the goal in the fiscal year 2022-23 by a wide margin as the railways, telecom and petroleum sectors are unlikely to meet their targets, the Financial Express reported.
There could a shortfall of about Rs 50,000 crore as against the FY23 NMP target to generate Rs 1.62 trillion in revenues and investments, officials told the newspaper.
Finance minister Nirmala Sitharaman, in her Union Budget for FY22, had unveiled the Rs 6 trillion NMP with a four-year roadmap [from FY22 to FY25] to monetise existing infrastructure assets by leasing them out to private firms for a fixed tenure under a revenue-sharing model. It’s aimed at generating funds for infrastructure spending.
According to the newspaper, the railways and telecom sectors – which accounted for half of the asset monetisation target for the current fiscal – were the worst performers. The petroleum sector was also seen as the worst performer in achieving its asset monetisation target for FY23.
For the entire period till FY25, Railways has a monetisation target of Rs 1.52 lakh crore, which includes the monetisation of 400 stations and privatisation of 90 trains and 15 railway stadiums.
It’s the biggest component of the Rs 6 trillion NMP, which is why the government in May last year took serious note of the railway ministry’s failure to achieve the asset monetisation target in FY22, the Economic Times reported.
On the other hand, the mining industry – which is one of the core industries of the economy – has been making up for the poor show of the railways for the second consecutive year.
“With the end-of-the-year position not looking good, the railways’ target has been reduced to about Rs 30,000 crore for FY23 from Rs 57,222 crore while the target for ‘coal and other mining’ have been increased to about Rs 37,500 crore from Rs 6,060 crore,” an official told the Financial Express.
‘Coal and other mining’ had yielded upfront revenues and capex to the tune of Rs 58,000 crore in FY22 against the target of Rs 3,394 crore, the report said.
In FY23 also, the actual achievement of the coal and other mines monetisation by way of revenues in upfront premium, annual royalties and investment by private players are expected to be higher than the revised target, it said.
in FY22, the Union government completed deals worth Rs 96,000 crore through the monetisation route, 12% more than the target. Roads, power and the mining of coal and minerals contributed the most to surpassing the asset monetisation goal, Mint reported.
However, railways collected just Rs 800 crore via monetisation through the redevelopment of one railway station and some railway colonies in the last fiscal year as against the target of Rs 17,810 crore.
Even this fiscal year, according to the NMP, the railways needs to monetise 120 stations, 30 trains and a 1,400-kilometre track, among others. But, as per the report, it has achieved little so far.
The Department of Telecommunications (DoT) has so far not raised any money through the asset monetisation route. It was expected to raise Rs 20,180 crore in FY23, including Rs 15,780 crore from BharatNet fibre and Rs 4,400 crore from mobile tower sales.
However, the DoT decided to drop BharatNet Infra from its asset monetisation plan, news agency PTI reported in December 2022, as it failed to get a satisfactory response from private players. And, bids are yet to be called for the Rs 4,400 crore BSNL/MTNL tower monetisation plan.
According to another FE report, the railways and telecom sectors have decided to rely more on self-funding, budget support, and debt for their capital expenditure, instead of the asset recycling mode.
The monetisation of natural gas and petroleum product pipelines was projected to fetch Rs 9,176 crore in FY23. However, oil and gas companies have proposed alternate assets such as monetisation of oil fields (on the lines of mines monetisation) through private participation in exploration, the Financial Express reported.
“We are trying to see if those can qualify as asset monetisation. These firms have proposed increasing production with private sector participation and technology,” another official told the business daily.
If Amazon, with barely 2% of the retail market, can be called “East India Company 2.0”, how would one describe inviting foreign capital to buy into hitherto government monopolies?
This piece was first published on The India Cable – a premium newsletter from The Wire & Galileo Ideas – and has been updated and republished here. To subscribe to The India Cable, click here.
After accusing Infosys of working against Indian interests, the RSS-affiliated publication Panchjanya has described Amazon as “East India Company 2.0”, seeking a monopoly in Indian retail with “initiatives for seizing the economic, political and personal freedom of Indian citizens.” There are accusations that Amazon has spent $1.2 billion in legal fees or allegedly underhand payments to expand its Indian operations. The US authorities are ostensibly investigating.
The Swadeshi Jagran Manch (SJM), affiliated to the RSS, has also argued that e-commerce giants like Amazon will hurt small traders and kirana stores in India. But the Reliance group and the Tatas are also in the same space (Jio Mart and Big Basket). The Tatas are tying up with Walmart to build a bigger e-commerce platform in India. If Amazon harms small kirana stores, so will Jio Mart, Big Basket and the Tata-Walmart joint venture. By exclusively objecting to Amazon, Sangh parivar affiliates like Panchjanya and SJM may be indirectly aiding the e-commerce projects of domestic business monopolies. This would not necessarily save the small kirana stores the Sangh Parivar claims to be protecting.
Policy contradictions are inherent in the Sangh ecosystem’s articulation of the issue. Some of them may not stand the test of WTO rules on trade and investment reciprocity in services. They may even fall foul of the emerging Indo-US bilateral economic partnership, a counter to China, whose e-commerce investments are being shunned by India.
The Modi government has officially allowed Amazon, Jio Mart and the Tatas to work within a regulatory system which is evolving rapidly in response to massive growth in the sector, accelerated by the pandemic. A new normal is being reached in e-commerce as fresh regulations are brought for orderly growth.
The Indian retail market is worth $800 billion and e-commerce has barely 5%-6% of it. So roughly, about $40-50 billion in annual sales happen via e-commerce platforms like Flipkart, Amazon, Jio Mart, Big Basket and smaller players. E-commerce may treble by 2025, helped by the big push to the digital business ecosystem. The political economy outcome: small grocers and kirana stores will be affected, and forced to reinvent themselves. This has happened in other societies where e-commerce and big format physical stores like Walmart have become dominant. There is no escaping the effects of policy choices for promoting e-commerce in general. Sangh Parivar outfits railing against a single entity like Amazon are hypocritical and diverting attention from the real issues.
If Amazon, with barely 2% of the retail market, can be called “East India Company 2.0”, how would one describe the Union government, which is inviting foreign capital to buy into hitherto government monopolies like General Insurance Corporation and Life Insurance Corporation, besides promoting wholesale privatisation in strategic sectors like energy and railways? This is really rolling out the red carpet for “East India Company 2.0”!
However, the RSS and its affiliates have observed radio silence on big divestments in insurance, which was always strictly a no-go sector for the RSS. It was an article of faith that foreign insurance companies must not have unbridled access to Indian savings. BJP backbenchers defied their own leader in Parliament, Jaswant Singh, to vote against a minor increase in the foreign investment limit in insurance under UPA1. Singh had assured then finance minister P Chidambaram of support in amending the law.
But the bill enabling divestment of insurance companies was pushed through by the BJP without any discussion! Sangh parivar outfits must realise that the rhetoric of “East India Company 2.0” has zero credibility, given that the Modi government has put up most strategic government assets for sale. Running with the hare and hunting with the hounds has its limits.
“I am very happy that this government never achieves its target. Because bad ideas should not be completed on the target date,” he said.
On August 23, finance minister Nirmala Sitharaman announced the National Monetisation Pipeline (NMP), which is expected to fetch around Rs 5.96 lakh crore to the government. Following through on a decision announced in the Budget to monetise public assets to fund fresh capital expenditure on infrastructure, the government released a list of projects and facilities to be offered to private investors over the next four years through structured leasing and securitisation transactions.
One, only assets that are already operational are planned to be leased out under the NMP. Two, the government says it only plans to hand over control of its assets for a certain period of time, after which the assets must be returned to the government unless the lease is extended. The top three sectors identified for asset monetisation include railways, airports and coal mining. Concerns have been raised around the move – corporate favouritism, rising costs for users and handing over strategic assets amongst others.
Speaking to The Wire, former finance minister P. Chidambaram laid out his key concerns around the idea of a National Monetisation Pipeline.
Chidambaram said that as a principle, the private sector does manage infrastructure projects better. But it was too much of a generalisation to say all private sector cases are a roaring success and all public sectors cases are a disaster – something borne out by the number of cases in the IBC (Insolvency and Bankruptcy Code). The former finance minister said the telecom space was a prime example of how poorly thought out the NMP was. He asked, who will lease or buy out the assets fibre or telecom towers; it would either be one of the two players or a consortium of the two players. While he had nothing against the private sector, the problem was around monopolies. The same problem would present itself in the power sector where he believed only a few players would remain. There is nothing in the NMP that it would avoid monopolies if they did emerge.
Next, the prime concern Chidambaram laid out was that if a private sector company takes an asset on for a long period of time, what are you building into the model to ensure that the asset you leave behind is nearly as good as the asset that was inherited? He asked, “When the finance minister says we are owners and the asset will be returned to us, what asset is she talking about and in what form? It will be a completely depreciated asset.” Chidambaram said that is why he was proposing depreciation of asset should go into depreciation reserve, and that must be used by the private sector in order to keep the asset in good shape.
Another big concern he highlighted was the threat of price rise for the end user. Unless there is effective regulation prices will go up, to which private sectors will say you are over regulating us. Chidambaram said he was appalled by the idea that a bulk of the railways will be privatised – UK, France, Italy and Germany all run excellent public railway infrastructure.
Hitting out at the poor implementation of the plan, Chidambaram said there was no clarity of the process of selection of private players while leasing out infrastructure. He told The Wire, “My biggest fear is the motive of this government. The motive of this government has been suspect ever since they started this exercise of cherry picking airports, ports and other infrastructure and giving it away. That has not been a good experience for the country or the economy. The past does not inspire confidence, so why should the future?”
What about the other end of the story, The Wire asked him – was there enough private sector appetite and financing depth for these lease offers? To Chidambaram’s mind, the invite and rate process will be driven by foreign capital, not the retail domestic investor. Pensions funds and PE funds that will fund the bulk of the SPVs that will finance these assets will be nominally Indian, but foreign owned for all practical purposes – and so it’s possible that foreign capital will own most of this country’s infrastructure.
Importantly, he points out that even if the assets that are privatised are monetised, assuming they will yield Rs 1,50,000 crore is a mistake. “What is the big earning when you are only earning on the difference on that? The finance minister doesn’t respond to that, she says I am going to get Rs 1,50,000 crore but she doesn’t answer the question, ‘What are you getting today?’ You’re not getting zero. Some assets may be loss-making but some will be profit-making, tell us the number? But she won’t tell us the number. Be that as it may, look at the number on the other side – for Rs 6 lakh crore, they are monetising assets worth lakhs of crores. They have disclosed the break-up of this Rs 6 lakh crore but not the capital investment made in the assets being put up for lease. Suppose the value of the asset that you have listed is Rs 200 lakh crore, what is the point of earning less than 2% or 3%? What is the value of the capital you have locked in, what is it that you hope to earn.”
On where the proceeds may finally be deployed, the former finance minister observes, “The fiscal deficit for your current year is Rs 5.5 lakh crore and you are going to make at the maximum Rs 1.5 lakh crore, so how is it going to bolster public investment? Will this amount be used to fill the deficit or will you use it for infrastructure investment? There is no clarity on that.”
In a scathing attack on the proliferation of “infrastructure schemes” announcements by the government, Chidambaram said, “You say the NMP is co-terminus with the National Infrastructure Pipeline. We are building too many pipelines now. There was a 100 lakh crore planned there, what is Rs 6 lakh crore when you have a 100 lakh crore. These numbers don’t make any sense at all. You are trying to dazzle people by these numbers. But if you sit and think about this calmly, they make no sense. What is the objective? First, let the finance minister and government spell out the objective; is it raising revenue, is it partially filling the FD gap or is it enhancing infra spending? Next, what is the criterion for choice of the asset, why have these assets been listed?”
But the crucial question is, will the issue come up for debate and discussion, either in parliament or amongst key stakeholders. To that, Chidambaram responded saying, “I am very happy that this government never achieves its target. Because bad ideas should not be completed on the target date. This should be opened up for wide public discussion, there must be consultation with trade unions and other stakeholders and political parties and a full-fledged discussion in parliament. Of the last I am sure, they will never allow a discussion in parliament. The media is not getting into the debate, it is still singing hail to the King and the Queen. Has the finance minister invited any stakeholder to the discussion? She is unilaterally making announcements bit by bit, and the NITI Aayog and the CEA chip in.”
What is also unclear at this point is whether these lease agreements have any job security guarantees stitched into them. As the former finance minister warns, “Job losses are a major issue – the document has been silent on maintaining current level of jobs in assets that will be monetised and I believe on reservation. There is an equality and equity aspect to this and that must be considered.”
In effect, perhaps four or five big corporate groups with access to bank funds will bid for airports, ports, coal mines, gas pipelines and power generation projects for long term lease operations.
The Narendra Modi government does not seem to have fully thought through the myriad conceptual and operational problems it might face in its mega public asset monetisation programme to raise Rs 6 lakh crore over the next four years.
Public assets in sectors like airports, railways, roads, power, ports, gas pipelines, mining and telecom have been built painstakingly with the taxpayer’s money over the past 70 years. Now suddenly, these assets, which form the nation’s backbone infrastructure, are being offered to private players via long term leases of 25-50 years. It is tantamount to the government fully appropriating today, future cash flows to accrue over 30-50 years from these assets.
Whether it is 28,600 circuit km of power transmission lines run by Power Grid Corporation or 8,154 km of gas pipeline built by GAIL, or 160 coal mining projects ― which together are valued at close to Rs 1 lakh crore ― the government is offering these assets to private sector management on long lease but realising the entire bulk rental value today. On paper, the government says it will own the assets during the long lease period, which will be operated by the private sector. But effectively, they will be fully depreciated to zero value at the end of the period.
The key conceptual issue here is this: the Modi government wants to appropriate at once all future earnings from assets owned by the taxpayer, but there is no clarity on the compensation offered to the taxpayer. Imagine that as a taxpayer, you own a small portion of a gas pipeline or mineral deposit. Your earnings from it for the next 30 years are being captured today by the government. What you get in return is not clear at all, except a vague promise that this money will be used to create more infrastructure assets. In a hugely mismanaged revenue deficit financing framework, a large part will go towards paying salaries and meeting other current expenditures.
There is a major issue of inter-generational equity here. The government must clearly articulate it in an official document. How will the government compensate subsequent generations if it appropriates all their future earnings today? A clear framework of inter-generational equity needs to be spelt out to justify such a massive monetisation of public assets, listing new assets to be created or promising national debt reduction.
And what of implementation, Modi’s weakest link? The government has failed to achieve simple PSU divestment and privatisation targets so far. It is unable to find a buyer even for a blue chip oil company like BPCL. One can imagine what will happen in a complex 30-40 year outsourcing project to the private sector.
Big global pension funds refuse to buy into such a programme unless there is stability of long term contracts and assurance of independent regulation. The NITI Aayog has suggested forming sectoral Infrastructure Investment Trusts (INVITs) on the basis of the initial experience of leasing assets of Power Grid Corporation.
The public assets will be transferred to a separate entity to be financed by such trusts, which will act like mutual funds in which global and local funds will have shares. However, global funds are demanding that their management should not be dominated by members of the public sector, which would create conflict of interest. Moreover, for fossil fuel assets like coal mines and hydro/thermal generation plants, there will be no long-term investors. Global finance is shunning such assets under their environment and social governance policies.
In effect, perhaps four or five big corporate groups with access to bank funds will bid for airports, ports, coal mines, gas pipelines and power generation projects for long term lease operations. This could lead to massive wealth concentration even if the government remains nominally the owner. This is the point Rahul Gandhi has raised ― that these public assets may end up with a few corporate groups which already enjoy some degree of monopoly.
There is also the larger question of political stability. If leasing is done without consensus ― as is the Modi government’s tendency ― a future government can renege on such contracts. The Modi government must take all stakeholders on board, whether it is the Opposition, trade unions, senior public sector staff or civil society in general. Seventy years’ worth of public assets cannot be leased out on a whim.
The Congress leader alleged that the Narendra Modi government’s privatisation plan was aimed at creating monopolies in key sectors which will kill jobs.
New Delhi: Congress leader Rahul Gandhi on Tuesday slammed the Union government’s move to monetise its assets across key sectors, saying the Modi dispensation is in the process of selling India’s “crown jewels” built by previous governments with public money over 70 years.
Addressing a press conference here with former Union finance minister P. Chidambaram, he said the BJP has claimed that nothing happened in India for 70 years, but now all assets created in all these years are being sold.
Gandhi alleged that the Narendra Modi government’s privatisation plan was aimed at creating monopolies in key sectors which will kill jobs.
He alleged that the government was indulging in creation of monopolies in the formal sector and elimination of the informal sector.
Chidambaram said that raising funds cannot be the sole aim for selling assets built over 70 years.
The former Union minister felt that all stakeholders, including employees, worker unions, farmers, must be consulted before embarking on such large sale of assets.
Finance Minister Nirmala Sitharaman on Monday unveiled an ambitious Rs 6 lakh crore National Monetisation Pipeline (NMP) that included unlocking value by involving private companies across infrastructure sectors – from passenger trains and railway stations to airports, roads and stadiums.
As many as 25 Airports Authority of India (AAI) airports, including ones at Chennai, Bhopal, Varanasi and Vadodara, as well as 40 railway stations, 15 railway stadiums and an unidentified number of railway colonies have been identified for getting private investments.
The government aims to hand already built assets such as gas pipelines, roads, railway stations and warehousing facilities among others to the private sector to operate on a long-term lease.
New Delhi: Finance Minister Nirmala Sitharaman on Monday announced a Rs 6 lakh crore ($81 billion) National Monetisation Pipeline (NMP) that will look to unlock value in infrastructure assets across sectors ranging from power to road and railways.
She also said the asset monetisation does not involve selling of land and it is about monetising brownfield assets.
The aggregate asset pipeline under NMP over the four-year period is indicatively valued at Rs 6 lakh crore.
Finance minister Nirmala Sitharaman. Photo: PTI
According to Reuters, Amitabh Kant, chief executive of government think tank NITI Aayog, said the government aims to hand already built assets such as gas pipelines, roads, railway stations and warehousing facilities among others to the private sector to operate on a long-term lease.
“The strategic objective of the programme is to unlock the value of investments in brownfield public sector assets by tapping institutional and long-term patient capital which can thereafter be leveraged for further public investments.”
The government plans to garner Rs 1.6 lakh crore from the road sector, Rs 1.52 lakh crore from railway assets, Rs 45,200 crore from power transmission lines, Rs 39,832 crore from natural gas assets and Rs 35,100 crore from telecommunications projects.
“This is big and bold,” said Vinayak Chatterjee, non-executive chairman of Feedback Infra Group, a private infrastructure services company told the news agency. He said the programme’s scale and coverage is much wider than his expectation but will need an overhaul of the private-public partnership system.
The asset monetisation model has had a mixed track record with investors so far.
In the road sector government has already garnered Rs 17,000 crore, but India‘s plan to allow private players to operate some trains did not generate as much interest as expected due to regulations and contract enforcement requirements.
The government aims to monetise assets worth Rs 88,000 crore in the current fiscal year that began in April, and a transparent mechanism would achieve “a fair value”, Kant said.
Sitharaman said the programme would give an impetus to economic growth.
Earlier this year, Prime Minister Narendra Modi’s administration announced a privatisation plan which would leave government ownership only in a few critical sectors.
Although coronavirus lockdowns and the subsequent downturn have slowed the privatisation process, the government still hopes to raise Rs 1.75 lakh crore from such sales in the current fiscal year to March 2022.
Proceeds from privatisation are crucial for India, which witnessed a record fiscal deficit of 9.3% in the last fiscal year to March 2021, when the economy contracted by 7.3%.
By the end of the current 2021-22 fiscal year, the government aims to cut the fiscal deficit to 6.8% and revive economic growth to 10.5%.
