It makes sense to extract value from underutilized public assets

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It makes sense to extract value from underutilized public assets

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• Assets lying idle: In August 2021, the Supreme Court heard a petition requesting its instruction to govt. to restart an old, dead Chennai factory of HLL Biotech (a PSU), to start making Covid vaccines. 
• Problem all around: In India, there are public assets being mis-used by private people for free, e.g. roadside parking slots, municipal grounds, advertising surfaces. Parade grounds of police and defence services are used only a few days per year. These are all wasted public assets.
• Wasted earnings: If parking charges are levied sensibly, many cities can earn substantial revenues. But governments instead rely on taxes and devolved funds for revenues. 

1. Poor state of health, policing and education is often blamed on inefficiency and corruption, but no one thinks of lack of funds that stymies efforts to deliver better
2. That is why the NMP (National Monetisation Pipeline) is a good idea

• A shift in thinking: The idea now is that the government wants to extract value from its assets. NITI Aayog wants monetisation model for state, municipal and rural governments too. It may be a good idea to fund the post-pandemic revenue-starved governments (facing higher public expenditure demands).
• The problems: People normally assume this will be accompanied by corruption and cronyism. The point is: if all policies are objected to, and nothing new is ever tried, there will be just corruption, cronyism and sanctimony. It is better to make policy design corruption-resistant. Push for transparency and competition. Catch the wrong-doers.
• A basic rule: Government ought to monetise assets but not assign monopolies. There should be no exclusive rights, or price fixing. Contract design can take care of it, and regulations /laws too can.
• Statists versus Reformers: The NMP leases out assets rather than selling them, which is a middle ground between statists and reformers. 

1. Tenants will always take less care of the property than owners would
2. Owners and tenants always have different incentive structures
3. The GoI has to now ensure that a private sector lessee maintains the assets to certain standards (that the GoI may not have followed at all!)
4. Since assets are not owned, the private player may skip maintaining the assets well; GoI has to build in incentives for private parties for this

• Problem in long-term lease: Ownership is beneficial in another way - if any asset becomes unprofitable, then owners can sell it in parts or reshape/ reconfigure it, or scrap it. That creative destruction may actually ensure viability, and lease is a bad structure then.
• Asset definition: Many public assets are not precisely defined, and many interest groups develop on the periphery, over time. That can deter investors.
• Kind of investors: The government wants to maximise revenues, but it is equally important to have the right kind of investors. Can that happen? 

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