1. The National Land Monetisation Corporation
- GS Paper 2: Important organizations and statutory bodies.
Context:
- The establishment of the National Land Monetization Corporation has been approved by the Union Cabinet (NLMC).
- A totally owned Government of India corporation, the NLMC would have an initial authorised share capital of Rs 5000 crore and a paid-up share capital of Rs 150 crore.
- The National Land Management Corporation (NLMC) would be responsible for the monetization of surplus land and building assets owned by ‘Central Public Sector Enterprises’ (CPSEs) and other government entities.
- The proposal is in accordance with the Budget Announcement for the fiscal years 2021-22.
The following are the primary functions of the NLMC:
- The National Land Management Corporation (NLMC) is anticipated to acquire, retain, manage, and monetize surplus land and building assets of CPSEs that are being closed, as well as surplus non-core land assets of government-owned CPSEs that are being strategically disinvested.
- This would expedite the closure of CPSEs and make the process of strategic disinvestment in CPSEs held by the government more seamless.
- It is possible to transfer these assets to NLMC in order for them to be held, managed, and monetized.
- Additionally, NLMC will provide advice and help to other government bodies (including CPSEs) in identifying their surplus non-core assets and monetizing them in a professional and efficient way in order to get the greatest possible value from those assets.
- In certain instances, the National Land Management Corporation (NLMC) will perform surplus land asset monetization as an agency function.
- It is anticipated that the National Land Monetization Center (NLMC) would serve as a repository of best practises in land monetization, as well as assist and give technical assistance to the government in the execution of the asset monetization programme.
Composition:
- The National Land Management Corporation (NLMC) will have the technical knowledge required to competently manage and monetize land assets on behalf of CPSEs and other government bodies.
- The Board of Directors of NLMC will be comprised of top Central Government officials and prominent specialists to ensure that the company’s operations and management are conducted in a professional manner.
- Members of the NLMC’s Board of Directors, including the Chairman and non-government directors, will be nominated through a merit-based selection procedure.
What does monetisation mean?
- Monetisation of government assets fundamentally implies that the government transfers the revenue rights of the asset (which might be idle land, infrastructure, or a public-sector undertaking) to a private party for a fixed length of time.
- In such a deal, the government receives an upfront payment from the private firm, a regular portion of the revenue generated by the asset, a commitment of continued investment in the asset, and the title rights to the monetised asset in exchange for the asset.
- There are a variety of methods for monetizing government assets; in the case of land monetization for specific spaces such as offices, this can be accomplished through the use of a Real Estate Investment Trust (REIT), which is a company that owns and operates a land asset and, in some cases, provides funding for income-producing real estate properties.
- The Public Private Partnership (PPP) model allows for the monetisation of government assets as well as the privatisation of public assets. There are a variety of reasons why the government chooses to liquidate its assets. One of them is the development of new streams of revenue for the company.
- Although the economy has already suffered as a result of the coronavirus epidemic, income is required in order to achieve the Narendra Modi government’s goal of building a $5 trillion economy. It is also done to unlock the potential of underutilised or unneeded assets by incorporating institutional investors or private parties in the process of monetization.
- Third, it is done in order to produce resources or cash for future asset development, such as leveraging the money created through monetisation to fund the construction of new infrastructure projects, among other things.
How much land is currently available for monetisation?
- According to the Economic Survey 2021-2022, CPSEs have put approximately 3,400 acres of land up for grabs for prospective monetisation as of right now, according to the report.
- These lands have been sent to the Department of Investment and Public Asset Management for further investigation (DIPAM). According to the survey, the monetisation of non-core assets by public sector undertakings (PSUs) such as MTNL, BSNL, BPCL, B&R, BEML, HMT Ltd, Instrumentation Ltd, and others is at various levels.
- In March 2020, for example, BSNL said that it has identified a total of 24,980 crore worth of properties that may be monetised. Railways and Defence Ministries, on the other hand, own the majority of government land in the country.
- In all, the railways have more over 11 lakh acres of land accessible, with 1.25 lakh acres of that property being unoccupied. It is estimated that the Defence Ministry has 17.95 lakh acres of land under management.
- Around 1.6 lakh acres of this land is included inside the 62 military cantonments, with the remaining more than 16 lakh acres lying beyond the cantonment limits.
What are the possible challenges for NLMC?
- Furthermore, the effectiveness and productivity of the NLMC will be influenced by the government’s ability to meet its disinvestment objectives.
- During the first quarter of fiscal year 2021-22, the government has only been able to raise a total of 12,423.67 crore from different types of disinvestment.
- In the budget for fiscal year 2021-22, the government first set a disinvestment target of 1.75 lakh crore, which was later reduced to 78,000 crores after public feedback. The Life Insurance Corporation initial public offering (IPO), which was expected to raise Rs. 60,000 crores, is now clouded in doubt as a result of the Russia-Ukraine situation, which has caused stock markets to become unpredictable. If the initial public offering (IPO) does not hit the markets by the end of March, the government will fall well short of its disinvestment objectives.
- The process of finding a buyer for the state-owned airline Air India required a significant amount of time and talks before the Tata Group entered the picture.
- Furthermore, the process of asset monetisation does not come to an end when the government transfers revenue rights to private players; identifying profitable revenue streams for the monetised land assets, ensuring adequate investment by the private player, and establishing a dispute resolution mechanism are all critical tasks.
- Another potential problem would be the adoption of Public-Private Partnerships (PPPs) as a monetisation mechanism, which might provide a significant obstacle.
- For example, the outcomes of the Centre’s public-private partnership (PPP) project for the railways, which was started in 2020, were not positive. While the Indian Railways had asked private firms to run 150 trains, when bids were opened, nine clusters of trains saw no bidders, while three clusters had only two interested bidders, indicating that the invitation to bid had failed.
- In the case of these three clusters, the only serious bidder was IRCTC, which is owned by the Indian Railways. The inclusion of only a few serious bids would also raise the likelihood of a less competitive environment, which would mean that a small number of private organisations may establish a monopoly or duopoly in the operation of surplus government property.
- In the case of airports, for example, concerns were raised when the government removed the limit on the number of airports that could be bid for by a single entity, resulting in the Adani Group acquiring control of six city airports from the Airports Authority of India for a total of Rs. 2,440 crore.
