Sell India @ sale India, 2021

The decision to ‘lease’ public sector assets to the private sector is ill-advised and designed to help crony capitalists

Sell India @ sale India, 2021

MY Siddiqui

Prime Minister Narendra Modi had categorically ruled out privatisation of Indian Railways. Mocking at such apprehension, he had stated, barely two years ago, that the Government had no such plans. But true to form, his government has announced wide-ranging ‘privatisation’ of public assets, not just the Railways (See list).

The ‘Asset Monetisation’ scheme, on paper is attractive. The Government claims to have identified assets which have not been giving adequate returns or which are underutilized. Typically, nobody really knows details of the precise assets and how they were identified. With its characteristic secrecy, the Government did not deem it fit to have any discussion in Parliament or with stakeholders. No draft policy and rules were circulated. Its attitude, as in other cases, is that the Government knows best and people should either lump it or leave it.

This decision follows in the wake of the disastrous handling of the economy by the Government. With declining growth and rising employment, this is not the best time to realise or to use the favourite expression of the Niti Aayog, unlock the true value of public assets, apprehend experts. Sell the family silver, if you have to, when it is profitable and not when you are in distress. But the Government clearly is in a dire state and is scraping the barrel to generate revenue. It had other options like printing money to tide over the crisis. But although its past attempts at disinvestment has been less than successful, it is still rushing headlong into privatising assets built with taxpayers’ money over the last seven decades.

Even monetisation of assets, say economists, can be done differently. As famously put by former Comptroller & Auditor General of India (CAG) Vinod Rai, auctioning public assets would fetch the Government more revenue than by inviting open or closed bids. It would be instructive to learn of Mr Rai’s analysis of notional loss that this asset monetisation would entail.

The economy has tanked since 2016 following a series of disastrous decisions beginning with the ‘shock and awe’ of Demonetisation. Implementation of an ill planned GST and the unnecessary tax concessions to the tune of Rs 1.45 lakh crore for corporate India followed in 2019. While the Government justified it by claiming that it would lead to capacity building, higher production and employment, nothing of the sort happened. Corporate profits did however rise to record highs even when production stalled, prices rose and employment declined. To compensate for the loss the Government has had to tax petroleum products steeply, adding to the common man’s woes.

Now the existing revenue generating assets identified by the Government, which the Union Government will monetise over the next four years are expected to generate six lakh crore rupees, announced the Finance Minister on August 23, 2021 as part of the National Monetisation Pipeline (NMP).

Under the NMP, the government will let the private sector bid for operating such assets for 25 years in lieu of a lump sum payment paid upfront; but the Government will not give away the title or ownership of the assets. But with the Government ceding the right to maintain and operate the assets for the next 25 years till 2046 and beyond, will the Government’s ownership mean anything at all?

The Private Sector undertakings which take over these assets will calculate what they can earn from them in various ways, discount the cash flow to the present value, deduct their profit margin and pay the balance to the Government as upfront rental. What is certain is that the cost of services at railway stations, airports, ports and highways will increase manifold as the successful bidders squeeze the assets dry.

Sell India @ sale India, 2021

By 2046, the present dispensation will become history. Many of the present generation of people above the age of 50 will pass away; and Indians now in their teens will be left to hold the can, if there is a can in 2046. Public memory being proverbially short, the Government is reasonably certain that no questions would be asked.

Railways are the second biggest infrastructure after national highways, identified by the ambitious NMP. Monetisation of 400 stations, 90 passenger trains, one route of 14,00 kms of Railway track, 741 kms of Konkan Railway, 15 railway stadiums, selected railway colonies, 265 railway goods sheds and four hill railways are all in the list.

The presumptive monetisation value has been estimated by the Government to be Rs.1, 52, 496 crore. It is however not clear if this figure has been arrived at after deducting the present revenue being generated. In any case, out of this Rs.17, 810 crore would be monetized this fiscal (2021-22), Rs.57, 222 Crore in 2022-23, Rs. 44,907 Crore in 2023-24 and Rs. 32, 557 Crore in 2024-25.

Monetisingof railway stations and passenger trains is estimated to fetch about Rs.76,250 crore and Rs.21, 642 crore respectively. Monetisation value of Konkan Railway is estimated at Rs.7,281 crore and of Hill railways at Rs.630 rore.

Other segments of Railways’ monetisation are 673 kms of Dedicated Freight Corridors at Rs.20, 178 crore, from track, signaling and Overhead Equipment (OHE) Rs.18,700 Crore; Identified goods-sheds for monetisation are to fetch Rs.5, 565 Crore and Railway colonies’ redevelopment Rs.2, 250 crore, as mentioned in the NMP document. Monetisation of these brownfield infrastructure assets would garner over Rs.1.52 lakh crore in four years till financial year 2025. Railway assets will thus contribute 26 per cent of the Rs. 6 lakh crore rent expected to be yielded under the NMP. The NMP will end up destroying public assets built over several decades with hard work and taxpayers’ money and land. While uttering much touted ‘Atmanirbhar Bharat’, the Union Government is breaking the backbone of indigenous self-reliance and serving actively the interests of Indian capitalists and global imperialism to the detriment of public interest. Allowing foreign players into core areas like road, transport, aviation, ports and Railways, which is a distinct possibility, should have been deliberated at much greater length.

PM Modi is serving on a platter India’s blue chip infrastructural assets to the Private Sector and market forces to make profit, pawning the nation to select few corporatesand allowing them to covertly manipulate the so-called global bids.

Experts have been ringing warning bells. “In New South Wales (Australia), where electricity prices doubled in five years after poles and wires were privatized, the government had to step in with an Energy Affordability Package to lower the burden on consumers. The Indian taxpayer, already struggling under extortionate levies on energy, simply can’t afford such largesse,” writes Andy Mukherjee in Bloomberg. The fear that handing over control of public utilities to a small private sector will hurt the consumer is, clearly, not unfounded.

The PM’s politics, designed to dazzle and obfuscate, distract people from remembering their dispossessed and alienated status and allows the loot and plunder to continue.

Most economists have calculated that the NMP will be high on rhetoric and possibly efficiency but low on employment; they also calculate that the Government may end up garnering a maximum of Rs. 3 lakh Crore, half of what the Government says it expects, and in the worst-case scenario no more than Rs.1.5 lakh Crore. Given the proclivity of private corporates for hiring the best financial minds to fudge the balance sheet to evade taxes to the national exchequer, the Government, it is feared, will not meet the target.

The private lessees on the contrary will squeeze out the assets to maximise profits, their sole motive being to maximise profits, and at the end of the tenure return lesser-valued assets to the government. Commentators also apprehend that the mechanism will help the ruling party add to its coffers at the cost of the national economy. While BJP will thus become richer and grow stronger, the Opposition and the civil society will be denied a level playing field.

Economists view the NMP as a tool which will inevitably create private monopoly or duopoly in different sectors and, like the Russian oligarchy, allow a few businesses to capture the government. Unemployment will increase manifold. It will end up destroying market economy altogether.

A prophecy that Indians must hope will not come true.

Views are personal

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