Asset monetisation will inject efficiency, consumer friendliness into creaky infrastructure

(Image: AP)

The Union government’s asset monetisation programme, the National Monetisation Pipeline, will inject the much-needed dose of efficiency and consumer friendliness in India’s creaky infrastructure, and steer the pandemic-ravaged economy away from the path of fiscal trouble.

The step also carries forward the series of reforms implemented by the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) government, despite howls of protests from opposition parties that seem determined to block liberal economic policies and reforms, perhaps hoping that their negativity will strike a chord with the voters.

The government hopes to raise Rs 6 lakh-crore ($83 billion), over four years, which is more than double of India’s June quarter fiscal deficit of Rs 2.74 lakh-crore.

Apart from the flow of funds to State-run companies and the government, the bigger impact would be on efficiency and competition in the sector. State-owned infrastructure is often so poorly maintained and inefficient that placing it under temporary private control is akin to sending a battered premium car from a clueless roadside mechanic to an authorised service centre for repair — and getting paid for it!

Asset monetisation will generate a lot of excitement. One can expect a lot of interest in gas pipelines. India is building a national gas grid and plans to increase the share of gas in its energy basket from 6 percent to 15 percent by 2030. Energy companies would love to get into this market with readymade assets on offer, particularly when natural gas is expected to outlast liquid fuels in the global transition to an emission-free world.

Many gas users say that the dominant gas transporter, Gail India should hive off its pipelines business because the State-run is also in the business of distributing piped gas, which creates a conflict of interest. Monetisation of some of Gail’s pipeline is a step in that direction, although the future would depend on the extent to which Gail succeeds in maintaining the status quo. So far, it has resisted and blocked efforts to hive off its pipelines business.

Aviation assets will also generate a lot of interest. Private companies will be eyeing several airports. The private sector has a track record of providing world-class services at airports in Delhi, Mumbai, Bengaluru and Hyderabad, which are far superior to the shoddy airports under State control. Like natural gas, aviation in India is also expected to grow rapidly, particularly in tier-2 towns that have archaic, poorly-maintained airports. One can expect strong bids for airports in state capitals and business hubs that will be on offer. The government’s plan to bundle large airports with smaller ones will help modernise aviation facilities in smaller towns.

This sets the stage for a lot of corporate action in infrastructure, but there are many challenges. The government will have to conduct very transparent and fair auctions and take steps to ensure that companies make legitimate profits, but do not resort to profiteering, which is a risk when a State monopoly like an airport or power distribution becomes a private monopoly.

It will also have to watch out for potential disputes if a monetised asset develops serious problems because of poor maintenance or mismanagement by State authorities in the past.

It will need to move ahead faster than it has been able to in privatisation of BPCL, Air India and some railway services. Perhaps more importantly, it will need to deftly deal with trade unions and political opponents.

Political opposition is tricky. Politicians imagine a monopolistic catastrophe unfolding if a private company wins the auction of half a dozen airports, but they see absolutely nothing wrong with the Airports Authority of India managing a staggering 137 airports, including 24 that have international flights. Most of these airports offer poor or mediocre services, but allow generous, rule-breaking privileges to well-connected people, just like many bureaucrats and politicians prefer to fly Air India because one phone call bumps them up from the affordable but tightly packed economy class to the comfortable business class in the aircraft.

Sadly, the BJP’s political rivals led by the Congress have opposed virtually every major reform announced by this government, and have ruthlessly targeted India’s corporate sector.

They have also put forth laughable arguments. Politicians are alleging that the government is selling off the assets for a song. This is a lie. Asset monetisation is not privatisation because the ownership remains with the government and the asset comes back under State control, probably in much better shape, after a specified period.

Some have argued that the plan should have been debated in Parliament before it was announced. That is not the norm for executive decisions, and that is not what the Congress party did when its government announced path-breaking liberal reforms in 1991.

Opposition parties have raised concerns about companies fleecing people. While these concerns must be addressed, politicians should note that there are numerous instances such as mobile phone networks and airlines where the private sector has provided far superior service at competitive, and at times lower, rates.

Even opposition parties will realise that it is the private-sector-led telecoms revolution that made it possible for people to work from home and keep the economy ticking during the pandemic.

Finance Minister Nirmala Sitharaman and her Cabinet colleagues have done the right thing by responding to criticism from these parties, but they should make sure that such criticism does not come in the way of necessary economic policies.