Monetization Scheme Other Name For Disinvestment

Air India sale falls under disinvestment. Government has transferred 100 per cent ownership of Air India to the Tata Group. Consideration fixed is INR 18000 Crore. INR 2700 is in cash and the balance of INR 15300 is in the form of loan to be paid to the Central Government. On 27th January,2021, Tatas have formally taken over control of the ailing airline company owned by Government.

In 2015, the Government had decided to divest their control of 36 companies. Of the 36 companies only 8 companies have been divested apart from Air India. The first disinvestment was that of Modern Food Industries Ltd., in the year 2000 under Atal Behari Vajpayee. Disinvestment brought protests all round. The leftist caused much hue and cry.

Disinvestments failed to find pace. Then came Covid-19. Civil Society stood affected. Economy virtually came to a stand still. Came The Finance Act, 2021 to raise fund to meet Government Expenditure, the Niti Aayog recommended scheme on Monetization of Central Government Assets by way of lease to private sector was included. The assets included in the list are 26,700 Km of Highway, 400 Railway Stations, Ninety Passenger Trains, 4 Hill Railways including the Darjeeling Himalayan Railway, Telecommunication, Petroleum and Petro-Products, Natural Gas Pipeline. Under the scheme the listed assets will be leased to the private sector for long duration. Advertisement for lease of BSNL premises in Kolkata have been already released. Meantime The Model Tenancy Act , 2021 was approved by the Central Cabinet on 2nd June,2021. Some states like UP has adopted the Act in toto. The Act will also be useful for effecting the Monetization scheme.

Due to the down trend in the economy the Government had to look out for new avenues to increase its receipts. Monetization of Performing Assets by leasing them was identified to be a good route to fund raising. At the end of the financial year 2020-21 loan of the Central Government aggregated 60 per cent of the GDP. For the current year 2021-22, the loan is slated to be 62 per cent of the GDP. The percentage of loan to GDP was 48.6 per cent in the year 2019-2020. The sharp rise is alarming and could not be avoided. Covid- 19 outstripped everything.

The Central Government does not want to reduce increase its taxation rates to be at par with the other countries to attract FDI which is an important source of fund for the Government. Taxation in the country at the current level is 17.4 per cent of the GDP. It low compared to advanced countries. There are 12.6 million companies registered in India. LLPs under the The Limited Liability Act, 2008 , numbers registered total 1 lac. In the year 2005-06, 40 per cent of the companies registered under the Companies Act,1956 in loss. 55 per cent companies informed that informed that they did not earn profit above INR 1 Crore. In the year 2018 -19, the percentage rose to 51 per cent . Then there were 7,53,000 active companies that were in operation. About 3,85,000 companies operated at a loss. 3,68,000 companies earned profit to pay tax. In the year 2018-19, 43 per cent of the companies earned profit less than INR 1 Crore ( i.e. 3,23,800) .

Demonetization of performing assets owned by the Central Government will be leased to persons/entities who have the capacity to take them on lease. With the numbers given above it will be observed that the choice of leasing will be restricted to a few only. This will lead to concentration of power in the hands of a few, further. Those taking the lease will fund the leases not out of own funds alone. There will be borrowing which will be at a cost This cost will again be passed on to the consumers. Entities listed who take leases will hold foreign funds which is permitted for listed entities. Foreign entities will again indirectly hold interest in the leases. Leases could be out of funds generated through IPO, FPOs, Rights Issues, Bank Borrowings. Indian Bond Market has not matured at the required level so Bonds will not play a significant role in the leases. Further leases over 30 years would entitle the Lessees to mortgage the assets to raise finance against the lease assets. What would be the situation in that case is to be seen.

Leasing to the private sector alone might not be the right option. Leading public sectors should be allowed to expand where they have proved successful . Larger scale will keep check on prices which might not be the situation in the case of private sector. The impact of the scheme will be felt only after a few years, not immediately. When Niti Aayog has recommended the scheme will surely prove beneficial but a serious check needs to be done so that concentration of wealth in the hands of the few do not happen. Let telecommunication sector be an eye opener.

The Budget of 2022 will be placed before Lok Sabha on 1st February. To find avenues we do not know what would be next. Let not the weaker section become weaker further to increase revenue for the Government.