Will India’s Monetization Program Ever Work?


The government has announced a very ambitious plan to monetize infrastructure assets worth $ 81 billion. Experts think it’s a good idea, but it looks challenging to implement. The timing isn’t perfect either.

The Indian government has announced plans to raise $ 81 billion through the monetization of state-owned assets such as land, roads and stadiums. She wants to do this in four years between 2022 and 2025 as part of the National Monetization Pipeline (NMP) program.

The main aim is to unlock the value of brownfield projects and to involve private-sector actors by transferring revenue rights to them. Brownfield projects mean that some work has already been done so investors don’t have to start from scratch.

The government has made it clear that it will not transfer ownership of the assets to the private actors and will use the funds generated to build infrastructure across the country.

When announcing the program, Finance Minister Nirmala Sitharaman said that “further investments in infrastructure construction can be secured by including private investments”.

Can the private sector do better?

In principle, the government transfers revenue rights to private parties for four years in return for payment in advance. The government believes that the private sector will be able to run these projects and make money if the government fails.

The central government has been very vocal about privatization, and in February this year Prime Minister Narendra Modi said during a webinar: “When a government does business, it leads to losses. The government is bound by rules and lacks the courage to make bold business decisions. “

“It is the government’s duty to support businesses and corporations. However, it is not essential that she owns and runs companies, ”he added.

time to act

The Indian government has suffered a severe blow from the COVID pandemic and needs money to run its public welfare programs. Asia’s third largest economy shrank 7.3% last year after the government imposed the world’s toughest national lockdown.

The government tried to sell some of the ailing public entities or companies in which it held large stakes. But it failed because of the poor market conditions.

A list of the great assets

New Delhi has created a huge list of assets including 15 train stations and 25 airports. There are also 160 coal mining projects, 31 projects in nine major ports and two national stadiums.

A total of 20 asset classes are involved in this scheme.

Still, many are skeptical. “That is not the solution to the country’s current problem,” says economist Arun Kumar of DW.

In a telephone interview, he said the country needed more demand and a stronger public sector to serve the people. “When the private sector takes control of most of the country’s infrastructure, the poor will not be helped.”

Kumar added that it is not the right time to monetize these assets as the returns are not great and this would help the private sector get cheap assets.

Further information required

In a notice to customers, Care Ratings said more questions would need to be answered for this ambitious plan to work.

It is unclear how private parties would react to public-private partnership (PPP) agreements, as the assets in question would have to be returned to the government after four years.

Care Ratings also warned that it did not know how hungry the market was for such large issues, saying that while the stock market is currently on the move, its future performance is uncertain.

New Delhi has a long history of failed programs like a goods and services tax, demonetization, the “Make in India” program and the way it dealt with the economy even before COVID knocked on its door. Observers will now look very carefully at how the national monetization program is being handled.


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