Monetising assets, such as railway stations, requires a supporting institutional mechanism

A highlight of finance minister Nirmala Sitharaman’s Budget speech was setting out the government’s intent to develop infrastructure. This is expected to be the springboard of economic growth. Building blocks for this approach were put in place before the pandemic, when the National Infrastructure Pipeline (NIP) was launched in December 2019. It now has a pipeline of 7,400 projects, which requires major funding expansion from both government and private sector.

The government’s plan is to realise this goal through three concrete measures: create the necessary institutional structure, monetise assets and expand capital investment through budgets. One of these measures, monetising assets, is already underway. Monetising functioning public infrastructure is a way to generate more funds by drawing in private sector participation. The government plans to launch a “National Monetisation Pipeline”. Key to the plan’s success is that of some ongoing monetisation projects, such as the redevelopment of key railway stations in Mumbai and Delhi which began last year. This is where one of the concrete measures flagged in the Budget speech needs to be strengthened.

Typically, public infrastructure monetisation has to find ways to circumvent possible monopolisation. Getting this wrong vitiates the environment and can derail the entire programme. The only way to insulate asset monetisation programme is to create a transparent institutional mechanism. Here reality has lagged rhetoric. For example, the Centre cleared the proposal to establish a rail regulator a few years ago, but never acted on it. This is a prerequisite in asset monetisation, as calibrating user charges requires transparency. There is a template for it. A legislative framework created a statutory body in 2008 to fix aeronautical charges on the heels of airport privatisation. The Airports Economic Regulatory Authority of India is a key element to successful monetisation of airports.

Even as the monetisation of railway assets goes on, it’s important to simultaneously put in place a regulator to ensure smooth functioning. Successful monetisation requires the government to learn lessons from earlier experiences. A secondary objective of asset monetisation is to enhance efficiency of operations. In the absence of a regulatory mechanism this is difficult to achieve. The current push to expand and upgrade infrastructure is important to improve India’s competitiveness. This will translate into high growth rates and creation of jobs for an expanding workforce.


This piece appeared as an editorial opinion in the print edition of The Times of India.


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