Home / Opinion / The incredible certitude of our asset monetization programme

Boy, I got vision, and the rest of the world wears bifocals," Butch Cassidy told the Sundance Kid in the 1969 Hollywood film Butch Cassidy and the Sundance Kid. Incredible certitude is the term that best describes the ambition of the National Monetisation Pipeline (NMP), the government’s plan of leasing out its assets to private sector entities for upfront or periodic payments.

The assets that are likely to be monetized are government-owned roads, ports, airports, railways, warehouses, gas pipelines, stadiums, mines, housing and so on. As the Niti Aayog’s Monetisation Guidebook points out: “This enables a balanced risk sharing framework between the public authority and private party." The Niti Aayog estimates that the aggregate asset pipeline under NMP between 2021-22 and 2024-25 is indicatively valued at 6 trillion; 15% of these assets with an indicative value of 88,000 crore are envisaged to be rolled out before the end of March 2022.

This looks like a case of what the American economist Charles Manski refers to as incredible certitude. In a research paper titled, ‘The Lure of Incredible Certitude’, he writes: “Exact predictions of policy outcomes… are routine. Expressions of uncertainty are rare… Predictions and estimates often are fragile, resting on unsupported assumptions and limited data. So the expressed certitude is not credible."

So, why is the expressed certitude incredible in case of the NMP? The idea of monetising assets through operational leases is much more difficult to execute than privatization, where the government exits a state-run business by selling out to a private party and is no longer involved.

Nevertheless, the record on privatization of the Indian government (and not just this one) has been abysmal. Every year, a massive disinvestment target is set and then missed. Alternatively, public sector companies are pushed to buy other public sector firms and that’s passed off as disinvestment.

The privatization process of Air India has been on for a few years and so has talk of privatizing public sector banks. The initial public offering of Life Insurance Corporation (LIC) of India, which finance minister Nirmala Sitharaman spoke of in her budget speech of February 2020, is still a work-in-process. Meanwhile, the stock market has gone from strength to strength.

When clean breaks take so much time or don’t happen at all, what is the possibility of the government earning trillions of rupees through the monetization of assets that it will retain ownership of and involvement with?

Take the recent case of Indian Railways trying to attract private players to run 150 trains. The plan at one level failed because private operators feared continued government interference. It is worth remembering what the Centre said in an answer to a question raised in the Rajya Sabha in March 2018: “Bulk of litigation in the courts… consists of cases in which the government is a party." The government is a happy litigator, given that officials taking other parties to court are not paying from their own pockets. Decisions to litigate are made at relatively low levels of governance, and the government keeps appealing in higher courts even if it keeps losing.

Currently, many big business groups are in financial trouble and there is thus a fear that the assets being monetized will end up in a few hands. Also, a lot of private capital in India is what economist Arvind Subramanian terms as ‘stigmatized’ and that doesn’t make things any easier for the government.

Nevertheless, in an environment where private consumption has taken a tremendous beating, the government needs to spend money building physical infrastructure and get India’s economy going again. The only way out for it to earn the money required without taxing people more, or ending up with a higher fiscal deficit, is to put its massive assets to some use. One cannot really argue against the logic behind the NMP.

Nonetheless, there are more than a few things that the government needs to do in order to get the NMP going. The sectors where government assets are being monetized need independent regulators. Judicial capacity needs to improve. The government needs to stop being a happy litigant.

Also, as Vijay Kelkar and Ajay Shah write in In Service of the Republic: “The safe strategy in public policy is to incrementally evolve—making small moves, obtaining feedback from the empirical evidence, and refining policy work in response to evidence." Of course, this is not going to happen overnight. Any incremental and sustainable change in a large bureaucratic system takes time.

To conclude, as Michael Blastland writes in The Hidden Half: The Unseen Forces That Influence Everything: “This is the poorly guarded secret of the policy-making trade: that while telling us how this or that new initiative will change our world for the better (because they know how things work around here), in truth it will likely fail by next Wednesday [and] be abandoned a year later after much kicking and screaming."

It’s fine to be ambitious, but some realism at the same time can do no harm. Public policy in India has become a case of oversell-and-underachieve, rather than undersell and overachieve, as it should be.

Vivek Kaul is the author of ‘Bad Money’.

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