In the Union Budget for 2021-22, presented amidst the COVID-19 pandemic, Finance Minister Nirmala Sitharaman batted for economic growth by increasing government's capital expenditure to Rs 5.54 lakh crore.
However, she resisted the temptation to hike taxes at a time when there were suggestions to increase tax rate for super-rich or levy a COVID tax. Instead, the finance minister banked on disinvestment and asset monetisation to increase government's revenue.
In her Budget speech, Sitharaman laid down an ambitious asset monetisation plan for public infrastructure which will help the government raise revenue not only in FY22 but for many more years.
"Monetising operating public infrastructure assets is a very important financing option for new infrastructure construction. A 'National Monetisation Pipeline' of potential brownfield infrastructure assets will be launched," the finance minister said in her speech.
Besides, she also announced setting up an asset monetisation dashboard to track the progress and provide visibility to investors.
The government will transfer five operational roads, with an enterprise value of Rs 5,000 crore, to the Infrastructure Investment Trust (InvIT) of the National Highways Authority of India (NHAI). It will also transfer transmission assets of Rs 7,000 crore value to PowerGrid's InvIT.
Besides, Indian Railways will monetise its Dedicated Freight Corridor (DFC) assets for operations and maintenance, after commissioning, while the government will also come out with the next lot of airports for monetisation through operations and management concession, the finance minister said.
Operational toll roads of NHAI, transmission assets of PowerGrid, oil and gas pipelines of GAIL, Indian Oil and Hindustan Petroleum, Airports Authority of India's airports in tier-II and tier-III cities, warehousing assets of central public sector enterprises (CPSEs), among others, are the other infrastructure assets that will be brought under the asset monetisation programme, Sitharaman said.
The government is also banking on asset monetisation to help bring its fiscal deficit to below 4.5 per cent of GDP by 2025-26. The finance minister pegged India's fiscal deficit at 9.5 per cent in 2020-21 and 6.8 per cent in 2021-22.
"We hope to achieve the (fiscal) consolidation by first, increasing the buoyancy of tax revenue through improved compliance, and secondly, by increased receipts from monetisation of assets, including Public Sector Enterprises and land," she said.
The fiscal consolidation path also factors in government's receipts from sale of stake in public sector enterprises, or disinvestment. The government targets to get Rs 1.75 lakh crore from disinvestment in FY22.
"In spite of COVID-19, we have kept working towards strategic disinvestment. A number of transactions namely BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam limited among others would be completed in 2021-22," Sitharaman said in her Budget speech.
The government has also proposed privatisation of two public sector banks, other than IDBI Bank, and one general insurance company in FY22. "In 2021-22 we would also bring the IPO of LIC for which I am bringing the requisite amendments in this Session itself," the finance minister said.
The government has also asked NITI Aayog to prepare a list of CPSEs that can be taken up for disinvestment.
The government had set an ambitious target of raising Rs 2.1 lakh crore through disinvestment in FY21. However, adverse market conditions because of the pandemic affected its plans and disinvestment in FY21 was revised to Rs 32,000 crore in the Budget.
The disinvestment and asset monetisation plan, if executed properly, can help the government in infrastructure creation and fiscal consolidation, experts believe.