The NMP is hardly the panacea for growth in India

Syllabus: General Studies Paper 2

Context:

The National Monetisation Pipeline (NMP) envisages an aggregate monetisation potential of ₹ 6-lakh crore through the leasing of core assets of the Central government in sectors such as roads, railways, power, oil and gas pipelines, telecom, civil aviation, ports and waterways, mining, food and public distribution, coal, housing and urban affairs etc over a four-year period (FY2022 to FY2025).

Unlocking the value

• The Eight core industrial sectors that support infrastructure such as coal, crude oil, natural gas, refinery products, fertilizers, steel, cement, and electricity have a total weight of nearly 40% in the Index of Industrial Production (IIP).
• According to NITI Aayog, the strategic objective of the asset monetisation program is to unlock the value of investment in public sector assets by tapping private sector capital as well as efficiency
• According to the  annual report (2020-2021) of the Department of Public Enterprises, Government of India, there are 256 operationally-run central public sector undertakings (CPSUs), employing about one million people.Out of these, 96 have been conferred the Ratna status (72, 14, and 10 are Miniratnas, Navaratnas, and Maharatna companies, respectively).
• According to the Economic Survey 2019-20, public enterprises should be in focus as India needs to invest about $1.5 trillion on infrastructure development in order to aspire to become $5 trillion economy by the year 2024-25

Objectives

• The national monetization pipeline envisages unlocking the idle capital from non strategic and underperforming government owned assets.

• It aims at reinvesting the received funds into new infrastructure projects and augmentation of assets like greenfield infrastructure creation.
• The government with its initiative claims to boost the economy, generate employment opportunities and drive the competitiveness of Indian economy

Need for taking stock of situation

• It is imperative for policymakers to look for the root causes for decline of profit making public assets in the backdrop of government contemplating reinvestment of funds received to create fresh assets post the the national monetisation pipeline exercise
• Not doing so, may put the country’s economy into vicious cycle of creating new assets and then monetizing the same then they become liabilities for the government at a later stage

Reasons for Declining PSUs

Cost overruns- it is the primary reason for failure of public sector enterprises, in some cases project completion time is exceeded that leads to elevated project cost making the project either unviable at the time of its launch or or causes a delay in its break even point.

Over capitalisation- the optimum input output ratio is not given due importance in majority of government infrastructure projects, that leads to over capitalisation

Policy measures- the lack of implementation of labour reforms, ineffective inter-ministerial and departmental coordination, poor decision making, inefficient governance and excessive government control are other reasons for failure

The Pradhan Mantri Gati Shakti National master plan

• It is essentially a digital platform for information sharing among different ministries and departments at Union and State levels, it also fosters a periodical review and monitoring of progress of cross sectorial infrastructure projects through GIS platform
• It also entails analytical decision making tools for dissemination of project related information and prioritisation of key infrastructure projects
• The scheme was launched for multimodal connectivity for synchronisation of operation of different departments of 16 ministries including railways and roadways for seamless planning and coordination in execution of infrastructure projects in timely manner

Initiatives by Department of public enterprises

• The department of public enterprises has initiated revamping of performance monitoring system of Central public sector enterprises to make the more transparent, objective and forward looking which is based on sectoral indices and benchmarks

The Atmanirbhar Abhiyan

• The economic survey 2020-21 has highlighted the government’s initiative to boost domestic production in steel sector true measures like inclusion of speciality Steel, the production linked incentive scheme, selling to micro small and medium enterprises etc.
• More such out-of-the-box policy initiatives are needed to rule out public asset monetisation schemes such as the NMP in future.

The Hindu link-

https://www.thehindu.com/opinion/op-ed/the-nmp-is-hardly-the-panacea-for-growth-in-india/article37956016.ece

Question- National Monetisation Pipeline cannot be the panacea for growth. It needs to be complimented by other measures for efficient use of public resources. Comment .