National Monetization Pipeline: Privatization by Sleight of Hand
Anand
On 23rd August, Union Finance minister Nirmala Sitharaman unveiled National Monetization Pipeline (NMP) which seeks to monetize Rs. 6 lakh crore worth core assets of the Central government over a period of four year. This is supposedly to unlock the value in the brownfield projects by engaging the private sector which will be transferred the revenue rights for at least a few decades. Roads, railways and power sector assets will comprise over 66% of the total estimated value of the assets to be monetized. The remaining upcoming sectors would entail telecom, mining, aviation, ports, natural gas and petroleum product pipelines, warehouses and stadiums. This is in line with Modi government’s strategic divestment policy, under which the government will retain presence in only a few identified areas and the rest will be handed over to the private sector. While the finance minister tried her best to distinguish it with privatization or divestment by saying that the ownership of the assets would rest with the government, in essence it is yet another mechanism devised by the policy makers, the hired hacks of bourgeoisie, to hand over to the moneybags the control over the assets which were created by the hard work of the toiling masses of this country over generations. It is tantamount to the handing over the family silver to the plunderers in return to paltry sum of money.
What is Asset Monetization?
Asset monetization, also called asset recycling, refers to the process by which a government transfers operational duties and revenue rights of assets such as roads, railway tracks, ports, power transmission lines, warehouses, stadiums etc. to the private players for a specified period and in return the private players give an upfront money, a revenue share and a commitment to invest in the assets. It is yet another model of the so-called Public-Private Partnership (PPP) apart from Operate Maintain Transfer (OMT), Toll Operate Transfer (TOT), and Operations, Maintenance & Development (OMD).
While unveiling the NMP, the finance minister said, “The NMP is talking about brownfield assets where investment has already been made, which are either languishing, not fully monetized or remaining underutilized. So, by bringing in private participation, you are going to monetize it better, and with whatever resource you are getting, you can put it into further infrastructure creation.”
The assets on the NMP list include: 26,700 km of roads, railway stations, train operations and tracks, 2,8608 Ckt km worth of power transmission lines, 6 GW of hydroelectric and solar power assets, 2.86 lakh km of fibre assets and 14,917 towers in the telecom sector, 8,154 km of natural gas pipelines and 3,930 km of petroleum product pipelines. In the roads sector, the government has already monetized 1,400 km of national highways worth Rs 17,000 crore. Another five assets have been monetized through a PowerGrid InvIT raising Rs 7,700 crore.
Also, 15 railway stations, 25 airports and the stake of central government in existing airports and 160 coal mining projects, 31 projects in 9 major ports, 210 lakh MT of warehousing assets, 2 national stadia and 2 regional centres, will be up for monetization. Redevelopment of various government colonies and hospitality assets including ITDC hotels is expected to generate Rs 15,000 crore.
The government did not bother to discuss its plan with the stakeholders such as trade unions, employee associations etc. Nor did it consider important to discuss it on the floor of parliament. The finance minister did not inform the citizens of this country as to why these assets are languishing in the first place and why cannot the government make a plan to utilize them to their fullest capacity to fulfill the needs of the citizens and the economy. As with all the efforts towards privatization, it is presumed that the private sector is inherently more efficient than the government sector and hence it must be handed over the task of utilizing the assets to the fullest, in another word to milk as much money as possible.
Why Now?
The move to start the monetization of precious public assets like roads, railway tracks and transmission lines has come at a time when the Indian economy is going through a period of crisis. This crisis had started much before the coronavirus pandemic. The lockdowns imposed in the wake of pandemic have given further blow to the economy. The government debt has reached to unprecedented level. There has been substantial drop in the government’s revenue due to the economic slowdown, the messy implementation of Goods and Services tax (GST) and reduction in corporate tax. In order to get more money for the burgeoning need of infrastructure development, the Modi government has been setting high disinvestment targets, but in successive years the receipt from disinvestment has remained way less than these targets. So, the government which is in dire need of cash has come up with this new scheme to raise money by handing over the assets to the private sector for a few decades.
The government claims that money generated out of the process of monetization will be used for the creation of new infrastructure. However, the government has not given any concrete commitment or a specific plan as to how the money will be used. The past experience suggests that whatever money the government will receive after handing over the revenue rights to the private sector are often used in large part in paying salary and meeting current expenditure rather than for creation of new capital assets. So, in absence of any concrete plan, the government’s claims that this exercise will help in the creation of infrastructure which will help in job creation remains doubtful.
Who Will Benefit?
The assets such as roads, railways, ports, gas pipeline, transmission lines which are being offered by the government to the private sector on a long-term lease are crucial public assets. Essentially, the government wants to appropriate all the future earnings from these assets in one go. There are multiple issues involved in this process. Firstly, the handing over such crucial assets to private sector is itself problematic, even if temporarily. It is expected that the government which claims to represent the interest of the people must utilize the assets built by the toil of masses with planning and efficient implementation rather than involving the private players whose main objective is the maximization of profit and not the well-being of the people. But we all know that the government’s claim of representing the interest of the people is a facade to conceal the fact that it is essentially the managing committee of the bourgeoisie. Secondly, the government’s claim that the ownership will not be transferred to the private players is vacuous because during a long lease period of a few decades the value of the assets would be deprecated and by the end of the lease period their value would tend towards zero. So even if the government retains the ownership, it would be devoid of any value due to wear and tear. In a way it would be worse than privatization because the private players would not have any interest in maintaining the assets to last beyond the lease period. Also, as the past experience of privatization and disinvestment suggest, the value of assets are often underestimated so as to benefit the private players. There is no guarantee that this time the valuation process would be fair. Given the close connection between the BJP government and the big corporates, people can hardly expect a fair deal. Hence it is bound to enhance the monopoly or oligopoly in the economy. Besides, as mentioned earlier, in absence of a concrete commitment and planning to use the money received in this process, there is a great possibility that it would not be fully used for the purpose of the creation of new capital assets.
The government plans to transfer the public assets to a separate entity to be financed by the sectoral trusts such as Real Estate Investment Trusts and Infrastructure Investment Trusts (INVITs). This entity will act like mutual funds having global and local shares. The global funds are already demanding that the management of such entities must not be dominated by the members of the public sector as it would create conflict of interest. So, the private players have already started demanding the full control and the Modi government is more than willing to bend backwards to fulfill the demands of the local and global capitalists.
Conclusion
To conclude, the National Monetization pipeline is yet another devious mechanism devised by the Modi government to hand over the precious public assets built by the toiling masses of this country during the last seven decades of independence to private capitalist class. It is being done to give more opportunity to the big bourgeoisie to arrest the falling rate of profit in the period of economic stagnation. Even the much talked about infrastructure development is aimed at benefitting the private players in the construction sector. As always this essentially pro-corporate policy is being branded as a measure of “reform” so as to sell it to the people. It is only going to increase the miseries of the working people and is bound to widen the gulf of economic inequality. Moreover, it remains doubtful that the money raised through this process will actually be used for the creation of new infrastructure. Hence, the ultimate sufferer will be the ordinary people of this country.
