As the Finance minister Nirmala Sitharaman said in her Budget speech: “Idle assets will not contribute to AtmaNirbhar Bharat. The non-core assets largely consist of surplus land with government Ministries/Departments and Public Sector Enterprises. Monetising of land can either be by way of direct sale or concession or by similar means. This requires special abilities and for this purpose, I propose to use a Special Purpose Vehicle in the form of a company that would carry out this activity.”
This is a good and innovative idea which some of the previous budgets lacked. Let’s look at this in greater detail and pointwise:
1• If you are the kind who likes walking around India’s big cities, you would definitely see a lot of government land lying unused bang in the middle of India’s biggest cities. Close to where I live in central Mumbai is the Bicycle Corporation of India, in one of the by lanes of Worli. In the one and half decades, I have walked past the company, I haven’t seen any economic activity happening. Peepul trees now grow from the walls.
This is a few acres of property bang in the middle of Mumbai, some of the most expensive real estate in the world, lying unused. This is criminal to say the least. Another great example of unused real estate is all the MTNL offices, all across Mumbai and Delhi.
2• It’s time to put these assets to some use and for the government to earn some money in the process. It’s not just the big cities that have all this excess land lying unused. Even a hill-station like Ooty, has acres and acres of land lying unused thanks to the Hindustan Photo Films Manufacturing Company Ltd, which is largely not functional.
Given this, one of the first things that the government needs to do is to make an inventory of all this land and put it up in the public domain. Of course, this inventory is not going to be made overnight and will take time. But it is important that this is done in the most transparent way, given that corruption and land sales, almost go hand in hand.
This is even more important because the government considers this route as an important source of revenue in the years to come. As the finance minister said in the Budget that over the years the government hopes to earn more money “by increased receipts from monetisation of assets, including Public Sector Enterprises and land”. Hence, getting the process right is very important. Any scandal can derail the entire process.
3• In cases where the land was taken from state governments to start a public sector enterprise, it is important that the land be returned to the state government and let the state government decide what it wants to do with it. In the years to come, state governments will also be running short of money to meet their expenditure. Also, this is the right thing to do. The state government can also use the land to attract more investment into the state. In some cities where there aren’t enough public parks, some land can even go to develop such infrastructure. The aim shouldn’t be to maximise the money earned all the time.
4• There is another factor that needs to be kept in mind here. Real estate prices in most big Indian cities have remained and continue to remain high. One of the major reasons for this lies in the fact that the land prices remain expensive across Indian cities. Hence, it is important that some of this land be sold to build affordable housing. Only if land prices come down, will home prices come down.
Other than helping people buy affordable homes to live in, the real estate sector has the ability to create a large number of jobs very quickly. It also has the capability to have a multiplier effect across many other sectors. Building real estate requires cement, sand, steel, bricks, pipes, etc., and so on. Once the real estate has been built in, moving into a home requires its own set of purchases. Buying homes also give a fillip to the home loans business of banks and housing finance companies.
5• Finally, it is important that the money earned through this route be used for a specific purpose and not just for bringing down the fiscal deficit, which has ballooned to Rs 18.49 lakh crore or 9.5 percent of the gross domestic product (GDP) this year. The fiscal deficit is the difference between what a government earns and what it spends and is expressed as a percentage of the GDP.
It is important that money coming from land sales be allocated towards specific infrastructure projects, preferably in the very state where land is being sold.
To conclude, the monetisation of excess government land is a great idea. Having said that, it needs to be executed in a proper process-driven and transparent way.
The writer is author of Bad Money.