Today, new approaches to asset management are emerging to protect the public interest while increasing revenue generation, which governments around the world are considering. India has also adopted a new asset management approach and is moving towards the acquisition of unused and unused assets of Central Public Sector Undertakings (CPSEs) / Public Sector Undertakings (PSUs) along with other government assets and fixed ‘enemy assets’. In an effort to better manage public resources. The government has identified it as a source of revenue to fund its ambitious infrastructure program and is exploring direct sales, leasing and other options.
Asset monetization creates new sources of income by unlocking the financial value of poorly used assets. Assets of CPSEs / PSUs and government departments are diverse and spread across the country. The government believes that raising money through these assets will provide much needed funding. For this purpose, the government divided all its assets into four groups: a) land and buildings; B) Brown-field operational assets such as pipelines, roads, and mobile towers; C) financial assets such as equity shares, debt securities, units of hybrid / structured finance assets; And d) other assets.
Of the above four, land is an important clear asset and the most viable option for earning its monetized income. The 13th Finance Commission also noted the importance of proper use of land held by the States, the Center and the CPSE / PSU. However, now that the government has introduced a policy framework for its money making, we have a long way to go in doing this. The land is scattered all over India and there are no official records on how much is available.
Maping vacancies across the country and keeping a list of them in the public domain is an important step in this direction. The Justice Commission has asked the ministries to identify and share details of their assets to be included in the National Money Making Pipeline in this effort. But most government agencies cannot say what surplus land they have. 6665 World Bank Policy Working Paper in 2013 Consider the three programs proposed for land management.
First, organizations that own central lands must identify the land required for their current and future terms of service. The remaining land should be treated as surplus. These companies should be asked to prepare a plan to monetize the surplus land. Second, the government should set up a land audit to identify the land required for companies and monitor what is in surplus. Can be taken as a model for Australia’s land audit implementation. Third, companies need to estimate the revenue generated by land monetization and include the amounts that reduce the need for budget subsidies as a source of revenue.
We need to develop an appropriate model for the departure of our land monetization process. Governments around the world are developing models to increase the value derived from public property. The models from Australia, Canada, China, France and the US came to light well. We also need to learn lessons from them and develop our own model. Of these, the Canada model is useful. The Government of Canada opted for ‘asset recycling’ to dispose of legacy assets and thereby generate revenue to invest in new assets or to renovate existing infrastructure.
The Canadian model for asset management utilizes a special purpose vehicle (SPV) – a Canadian land company and focuses on independent and professional governance. The process begins with the identification of the assets, after which the SPV buys the surplus assets, including government land, at market prices. It involves the management of purchased assets and ends with the sale to private buyers.
The Canadian model gave good results. Effective asset management has helped its government to improve the capital planning process. It now has a well-targeted capital investment plan; The country is setting budgets for 5-20 years. Its regional governments have also taken different approaches to promote property management at the local level. Some provinces make it mandatory for municipalities to have an effective asset management plan to obtain regional infrastructure funding.
The Government of India plans to launch SPV to implement the money making process. It is looking for a model consisting of real estate investment trusts (REITs) and infrastructure investment trusts (INVITs). Under REITs and invitations, selected assets are transferred to the trust, which provides an investment opportunity for institutional investors. The National Highways Authority of India and Power Grid Corp of India Limited have sought to sponsor an invitation to attract institutional investors. According to some estimates, the government could produce ₹2.5 trillion through asset monetization in the first phase. (The Commission is tasked with preparing the National Money Making Pipeline from 2020-21 to 2023-24)
An effective asset-management approach attracts information across the country and adds dots for value maximization. We need to bring people and skills together to solve our infrastructure problems. The government should do its part to attract interest on what property the private sector should provide. Although we need to create our own model for land monetization, we need to learn from the World Bank hints and the Canadian model for this ambitious program to be successful.
Vinay K. Srivastava taught in aities in Ghaziabad. His Twitter handle is meetdrvinay