Adversity does seem to help in innovation. The slowdown of the economy and the consequent fall in revenue growth seemed to have resulted in exploring new avenues for mobilising resources. The earlier plans at offloading shares of PSUs or even outright privatisation of PSUs, did not produce the desired results. Monetisation of public assets thus evokes interest. We posed a set of questions to M S Srinivasan, a renowned civil servant of the IAS Tamil Nadu cadre who retired as the Secretary, Petroleum & Natural Gas. His response:
HOW WORKABLE IS THE CONCEPT OF ASSET MONETISATION?
Workable, but there are several challenges like packaging, presenting it to prospective bidders, preventing monopoly or oligopoly, prolonged litigations because of inadequate homework ab initio…
THERE IS THE ASSURANCE OF NOT PARTING WITH THE ASSET, ONLY LEASING IT. HOW CREDIBLE IS THIS CLAIM?
A sale of an asset is very distinct from leasing it. There is no confusion here. Document drafting is the most important part of the whole exercise. Government of India should abundantly clarify that they are not selling the ‘family silver.’ There is no privatisation or disinvestment of any property but only management of the property by a contractor for a specified period.
OVER A COUPLE OF DECADES AGO, THE CONCEPT OF BUILD, OPERATE AND TRANSFER [BOT] WAS FLOATED. IT DID HELP IN DRAWING UPON THE RESOURCES OF PRIVATE ENTREPRENEURS TO EXPAND INFRASTRUCTURE. WHAT WOULD BE THE PROBLEM OF SCALING UP THIS EXPERIENCE?
BOT as a concept has worked reasonably well. It has undergone a lot of changes and modifications over the years, such as subsequently reducing the period initially agreed upon based on the lessee achieving the targeted revenue earlier than the contract stipulated, introducing viability gap model… Scaling up this BOT concept for all infrastructure projects is not appropriate. The reason is the different ways in which tariff is to be fixed for different projects. For assets such as bridges, highways, it is different from tariff fixation for optic fibre cables, gas pipelines, oil pipelines… where tariff is fixed based on long term marginal costing principles. So care is to be exercised. It is not ‘one size fits all.’
WHAT ARE THE SAFEGUARDS YOU SUGGEST TO ENSURE THE SUCCESS OF THIS CONCEPT?
Contract documentation has to be thoroughly wetted from legal points of view. This is to reduce, if not altogether eliminate, protracted legal battles later on. In any asset segment, not more than 10 per cent or 15 per cent should be given to one bidder. This is to prevent monopolies or oligopolies emerging and exerting undue influence. Packaging the assets needs attention. For instance, you cannot allot a specified length of roads to one contractor and bridges culverts lying therein to another contractor. Dispute resolution mechanism should be made clear-cut upfront. Revenue generation calculations must be left to proven outside experts instead of departments/ministries muddling it. In spite of this serious judgment, errors may happen; but at least it will be an external source of error unlike favouritism and political interference.
IF YOU FEEL THIS IS NOT WORKABLE WHAT WILL BE THE ALTERNATIVE REVENUE SOURCE FOR MEETING THE LARGE REQUIREMENTS OF INFRASTRUCTURE?
The concept cannot be faulted. It is known to everyone that any asset is managed- operated and maintained by the private sector better and more optimally than the government. For example: where private sector handles power distribution, leakages have been minimised.
Look at the way Hotel Ashoka and Hotel Taj operate in Delhi.
The concept is also workable. The complexities have to be perceived upfront and attended to. The way Air-India and BPCL privatisation is being handled by the Government does not inspire confidence.
YOUR PRIORITIES FOR THE SELECTION OF SECTORS
Roads (already in operation for a long time and where adequate experience and expertise are available). Power (generation, transmission and distribution, covering the entire gamut). Hotels & resorts, railways, telecom. In the case of oil and gas pipelines, a slightly alternative model may be thought of since these are capital-intensive and a lot of investment has already been made by the OMCs. These may be declared as common industry infrastructure, so that private sector can also use these subject to payment of suitable tariff. This will ensure more efficient use of such costly assets.
