The recent approval by the Union Cabinet of the National Land Monetization Corporation (NLMC) has put a spotlight on asset monetisation in India. As a government-owned entity, NLMC will take up the task of monetising surplus land assets. This venture was announced during the 2021-22 Union Budget where plans to establish a special purpose vehicle for this endeavor were revealed. The Government of India further introduced the National Monetisation Pipeline (NMP) in August 2021.
National Land Monetization Corporation (NLMC) Explained
With an initial authorised share capital of Rs 5000 crore and a paid-up share capital of Rs 150 crore, NLMC will serve as an agency function for surplus land asset monetisation. It will also extend technical advice to the Centre. The Board of Directors of NLMC will consist of senior Central Government officers and eminent experts for the professional operation and management of the company.
The Chairman and non-Government Directors of NLMC will be appointed through a merit-based selection process. The company will fall under the finance ministry’s administrative jurisdiction, and like similar specialised government companies including the National Investment and Infrastructure Fund (NIIF) and Invest India, it will hire professionals from the private sector.
Benefits of NLMC
One significant advantage of NLMC is enabling productive utilization of under-utilised assets to stimulate private sector investments. It will spur new economic activities, promote the local economy and generate financial resources for economic and social infrastructure. Additionally, NLMC is expected to manage and monetise surplus land and building assets of CPSEs under closure and the excess non-core land assets of government-owned CPSEs under strategic disinvestment. All these initiatives will expedite the closure process of CPSEs and facilitate the strategic disinvestment process of Government-owned CPSEs.
Challenges Faced by NLMC
However, NLMC may face significant challenges like identifying revenue streams in specific land assets, resolving disputes, handling various litigations, confirming clear property titles, and capturing investors’ interest in remote land parcels.
NLMC Functions
The primary function of NLMC is to monetise surplus land and building assets of Central Public Sector Enterprises (CPSEs) and other government agencies. At present, these entities hold a considerable amount of surplus, unused, and under-utilised non-core assets, particularly land and buildings. NLMC will also aid and support other government entities in identifying their surplus non-core assets and monetise them professionally and efficiently.
Understanding Asset Monetization
Asset Monetization refers to the process of unlocking the economic value of unutilized or underutilised public assets to create new revenue sources for the government and its entities. It is a response to the urgent need for infrastructure development in India as current public sector resources are insufficient.
Challenges Related to Asset Monetisation
Asset Monetisation faces challenges such as identifying revenue streams in various assets, slow privatisation pace in government companies, and difficulties in attracting private investors. Asset-specific challenges include low capacity utilisation in gas and petroleum pipeline networks, regulated tariffs in power sector assets, and low investor interest in national highways below four lanes.
Way Forward
The success of this infrastructure expansion plan depends on the roles played by other stakeholders, including State governments, their Public Sector Enterprises, and the private sector. Setting up a High-Powered Intergovernmental Group to re-examine the Centre and States’ fiscal responsibility legislation has been recommended by the Fifteenth Finance Commission. Maintaining transparency is key to adequate realisation of asset value. Recent experiences suggest that Public-Private Partnerships (PPP) now involve transparent auctions, a clear understanding of risks and payoffs, and an open field for all interested parties, making PPPs instrumental in greenfield projects.
Source: PIB.