The Union Cabinet will likely soon consider a proposal to create a Special Purpose Vehicle (SPV) for the monetization of non-core public assets such as plots of land under central public sector departments and enterprises (CPSE), sources told FE. The SPV will have its private sector chairman and government CEO, they added.
The entity, being created with an initial capital of Rs 150 crore, will likely have a workforce of around two dozen from the private sector as well as the government. The Center inserted a provision in the 2021 finance law to remove the stamp duty on the transfer of real estate from CPSEs to the proposed SPV, thus helping to accelerate the closure of sick CPSEs. However, the stamp duty at the applicable rates will be paid upon the final sale of the assets by the SPV.
The SPV, which will report to the management of public enterprises, will help dissociate the process of closing a CPSE from the sale of its real estate assets in order to avoid any delay in the closure of the loss-making entity.
Currently, there are 21 sick or deficient CPSEs that have received Cabinet approval for closure, some almost a decade ago. These units were unable to close for various reasons, including the delay in disposing of real estate assets such as 15,000 acres of land across the country.
The new policy will also contribute to the objective of the new strategic sector policy which provides for the closure of CPSEs where necessary and to reduce losses for the Treasury. Proceeds from monetizing non-core assets in departments and those identified for closure would greatly increase government non-tax revenue.
On August 23, Narendra Modi’s government unveiled a National Monetization Pipeline (NMP), seeking to generate initial revenue of Rs 6 lakh crore in four years from fiscal 22, from operational infrastructure projects. , as part of various innovative long-term rental plans that involve minimal transfer of government ownership of the assets. The move is part of a plan to get back on track to fiscal consolidation without any delay and create the fiscal weight needed to fund the Rs 111 lakh crore national infrastructure pipeline and other capital intensive enterprises. The idea is to attract private investment in infrastructure by making public matching funds available.
The assets to be monetized, through a “structured contractual partnership against the privatization or massive sale of assets”, will include sections of motorway, electricity transmission networks, freight corridors, airports, ports, gas pipelines and storage facilities.