Nirmala Sitharaman has announced an ambitious national monetization plan. The NMP is supposed to help the GOI monetize many of its resources and help them raise nearly Rs.6 trillion over next 3 years. But, how to make it work?
Proper PPP mechanism in place
Vinayak Chatterjee of Feedback Infra has pointed out that the monetization is nothing but public private partnership or PPP in another form. Hence the first step to make a success of monetization will be to have a proper PPP mechanism in place. In the past, most private units were unwilling to get into PPP with GOI as the terms were loaded against them. The PPP mechanism must ensure IRR for the GOI and ROI for the private investor. That is how to make it work.
Dedicated and nodal regulation
This point cannot really be overstated. One of the reasons, India could make a success of privatizing insurance and pensions is strong nodal regulation. It is time for the government to have a full-fledged ministry and a central regulator to oversee, supervise and control the entire monetization activity. While the regulator will have far-reaching powers, it would be incumbent on the centre to offer consistency of regulation. Knee jerk reactions like retrospective taxation must be avoided if India expects foreign investors to commit long-term funds to such asset monetization proposals.
States buy-in is important
The monetization of assets is unlikely to happen successfully, unless the states buy into the idea. Many of the asset monetization plans will pertain to assets where the state has control, presence or some form of economic stake. To get the states to buy into the NMP idea will mean ensuring that the interests of the state are protected, their revenue flows are defended and they see value in the entire project. In many of the mega road projects, the state is a very critical participant and also has an economic stake. While executing the NMP plan, the centre must have a clear narrative that appeals to all state governments.
Dispute redressal mechanism
One of the most important things that the government must put in place first and foremost is a dispute redressal mechanism for the NMP. There will be a plethora of disputes with the employees, partners, global investors over a number of issues. These cannot be allowed to hold up projects in totality. A proper dispute redressal mechanism must define the legal jurisdictions as well as methods of resolving disputes without having to approach courts. In fact, most of the global investors will insist on watertight contracts and proper dispute redressal. Government has set a target of Rs.88,100 crore in FY22, but more critical than front-loading targets is to put the complete structure in place!