Monetisation is nothing but another form of privatisation. It is actually worse than privatisation done through complete sale, says Dr A. Mathew, Secretary, KEC

Workers of the Indian Railways, electricity and many other sectors are very agitated about the National Monetisation Pipeline (NMP) announced by the Finance Minister on 23 August 2021. A correspondent of the All India Forum Against Privatisation (AIFAP) spoke to Dr A. Mathew, Secretary, Kamgar Ekta Committee (KEC) to understand what the NMP is and why it is against the interests of workers and people of the country.

AIFAP: Dr. Mathew, during the last few weeks we are all the time hearing this new word, ‘monetisation’. Will you please explain what does it mean?

Dr A. Mathew (Dr M): Monetisation of assets generally means sale or lease of assets which are not being used by an organisation or have become surplus over time. By doing monetisation, capital which is locked into idle or surplus assets becomes available to the organisation for funding its growth or for its day-to-day requirements.
Asset Monetisation, as envisaged in the NMP, entails a limited period license/ lease of an asset, owned by the government or a public authority or a public sector company, to a private sector organisation for a long duration for an upfront or periodic payment. Money received by the public authority is supposed to be reinvested in new infrastructure or deployed for other public purposes.

Monetisation as envisaged by the government in NMP is different from normal monetisation. The assets of the government/public authority or public sector company have been created with public money. They are being monetised and handed over to the private sector. The NMP envisages handing over these assets to a private company for its use for 30-50 years.

According to the government, the private sector entity is expected to operate and maintain the asset based on the terms of the contract and generate more profit through higher operating efficiencies and enhanced user experience. The contracts will provide for transfer of the asset back to the public authority at end of the contract.

AIFAP: The finance minister has claimed that monetisation is not privatisation since the assets remain the property of the government/public sector undertaking. Is this correct?

Dr M: The finance minister is legally correct because the asset will remain in the name of the government/public authority. However, when you hand over an asset for use for 30-50 years to a private company, it will be effectively owned by the private company for the lifetime of the asset. What will be the use of getting the asset back after it has completed its useful life?

We have seen in case of land that when it is leased for 50 or 99 years, it is assumed that the user of the land is the effective owner of the land. In Mumbai, the British government had leased the land for 99 years to capitalists for setting up textile mills. When the leases expired, mill owners refused to return the land to the state government even though the textile mills had already been shut down!

Monetisation is, therefore, nothing but another form of privatisation. It is actually worse than privatisation done through complete sale. Capitalists get to make profit without making any investment in case of monetisation. As they have made no investment, it is easy for them to close down their operation if for any reason they stop earning the expected profit or start making losses. Experience has shown that in many such case of privatisation the government had to take back the operation and bear heavy losses.

Monetisation is a highly favourable form of privatisation for capitalists. The assets which are proposed to be monetised under the NMP are very capital intensive. Capitalists do not like to put their capital in building such infrastructure and had forced the government to use public money for building them. Through the NMP, capitalists will be able to use these assets built with public money and the labour of thousands of workers for earning private profit.

When the asset is not owned by a capitalist, the maintenance and safety of the assets is neglected. No modernisation and upgradation of the asset takes place. Capitalist spends just enough to keep making profit. Such an asset would have no value even if returned at the end of the contract.

AIFAP: What is the National Monetisation Pipeline? Which sectors are covered by it?

Dr M: As per the NMP, infrastructure assets including roads, railway stations, power plants & lines, ports, airports, coal mines, oil and gas pipelines, telecom network, food warehouses and sports stadiums will be monetised.

As you can see, the largest amount of monetisation is proposed in the road and rail sectors. Together they account for more than half of Rs. 6 lakh crore planned over 4 years.

Over 26,000 kilometres of roads of the National Highways Authority of India (NHAI) will be privatised. The government hopes to collect Rs. 1.6 lakh crores from this. Besides charging toll, capitalists will make money by developing roadside restaurants, shops, petrol pumps, etc.

In case of railways, as many as 400 railway stations, 90 passenger trains and 265 good sheds will be privatised. It is proposed to privatise the entire 741-km long Konkan Railways and four Hill railways – the Darjeeling Himalayan Railway in West Bengal, the Nilgiri Mountain Railways in Tamil Nadu, the Kalka Shimla Railway in Himachal Pradesh and the Matheran Railway located in Maharashtra. One fifth of the Dedicated Freight Corridor (DFC) is planned to be privatised. The DFC has not even been completed but the plan to privatise it has already been made! Rs. 95,000 crore of public money is being spent to construct two DFCs. Further, 15 railway stadiums and innumerable railway housing colonies are planned to be handed over to capitalists. The government hopes to collect Rs. 1.5 lakh crores from this large scale privatisation of railway assets.

In case of the power sector, power generation plants with capacity of 6000 Megawatt will be monetised over FY 2022-25. Out of this, about 3500 Megawatt is from hydel assets and about 2500 Megawatt is from renewable energy assets (solar and wind). Further, one-sixth of power transmission lines of the Power Grid Corporation of India Limited will be leased out. The plan is to collect Rs. 85,000 crore from power sector monetisation.

The Airports Authority of India will offer 25 more airports to private operators, including ones at Chennai, Bhopal, Varanasi and Vadodara. Besides the two largest airports at Delhi and Mumbai, 9 major airports are already privatised. Housing colonies of airport workers have also been included in the assets to be handed over and a strong opposition to this step is being built up with the involvement of family members of employees. Airport monetisation will fetch Rs. 20,782 crore.

Other assets to be leased out include 28,000 circuit kilometres of power transmission lines, 2.86 lakh km of BharatNet fibre and 14,917 signal towers of BSNL and MTNL, 8,154 km of natural gas pipelines, 3903 km of petroleum product pipelines, warehouses of the Food Corporation of India, two national stadiums and seven residential colonies in Delhi.

AIFAP: Will you explain how the government hopes to collect Rs. 6 lakh crore in four years if it is leasing assets for 30-60 years?

Dr M: The government wants capitalists to pay lease fee to be paid in advance in one or more instalments by converting future fees into their net present value (NPV). Suppose the lease fee of Rs. 1 lakh is to be paid in the tenth year, its NPV is the amount of money that is required today so that after ten years it will become Rs. 1 lakh by earning interest at the current interest rate, say, 6%. The NPV will be around Rs. 55000 only for Rs 1 lakh paid in ten years later. More the years, smaller is the NPV. This is how the government hopes to collect money in a short period even though the assets will be leased for long time.

AIFAP: How will it affect people of the country?

Dr M: Capitalists will take up a project if and only if they believe that they can make maximum profits from it. They will insist on the government to set attractive terms by keeping the lease fee low and allowing the private sector to charge exorbitant fees from the public. When a private company fails to make the expected profits, it will demand that the government should fill the gap and if it starts incurring loss, it will ask the government to take back the asset.

People will have to pay more for using these assets, in order for the private companies to make more money than they have paid for the lease. Rail fares and toll for roads will be hiked. Rail passengers will have to pay user fees for modernised stations. The user fees in all privatised airports will greatly increase, as shown by the experience of privatization of the airports in Delhi, Mumbai, Bengaluru and Hyderabad. Electricity and petroleum products will become more expensive.

If any shortfall in profit of private companies have to made up or if monetised assets have to be taken back and their losses absorbed by the government, people will pay for them through higher taxes and duties.

AIFAP: How will it affect workers?

Dr M: Many a time, when a private company takes over, the working conditions become much more onerous. There is a concerted effort to break unions, and this has been facilitated by the new Labour Laws that the government passed during the pandemic, without any consultation with the workers and despite their strong opposition. When vacancies arise, the private employer will not fill them, or fill some of them with contract workers. Or they may make fully trained workers work as apprentice, giving them a pittance. All the rights that the workers have won through the struggles of generations, like pension, housing, medical and education facilities, etc. will be negated at a stroke.

AIFAP: What should workers and people of the country do to stop this anti-worker anti-people plan?

Dr M: The movement against privatisation has to be strengthened. Privatisation is an attack on every Indian, except the handful of biggest families and other vested interests. There are many federations and unions fighting against it, and positive steps are being taken to build unity against privatisation, corporatisation, monetisation, and so on by overcoming all barriers of trade union, party, regional and ideological affiliations. The formation of AIFAP is a step in that direction and Kamgar Ekta Committee was one of the founding members of the AIFAP and is working along with other constituent members of the AIFAP to broaden and strengthen this forum.

It is necessary to educate the people at large about how privatisation in any form will have an adverse effect on them. There is a special need to encourage the involvement and release the initiative of women and girls as well as of youth. Our guiding principle should be what all the organisations in AIFAP and many others subscribe to – “An Attack on One is an Attack on ALL!”.

Privatisation for instance is not a new thing. It is a part of the NEP or the New Economic Policy (NEP) of globalisation through privatisation and liberalisation that was accepted by the Congress government at the behest of imperialist agencies like the IMF and World Bank. Every government at the centre and in most states have followed this policy.

We and innumerable other workers’ and people’s organisations have been protesting against it right from its inception. The women’s movement had taken a strong stand against NEP from the beginning.

Kamgar Ekta Committee has wholeheartedly taken up the fight against privatisation. At the same time, we are also questioning what sort of democracy it is, where the voices of people are given no space. The only thing that we can do is to protest as strongly as we can against anti-people, anti-worker, anti-national actions and policies, but the government of the day is not bound by our views and wishes. After independence the public sector was built up with people’s money because that is what the biggest capitalists of those times, the Tatas, Birlas, and so on wanted. Now when the public sector has grown immeasurably and now that they themselves have become global players, the NEP suits them.

So while we continue to oppose privatisation, we must also fight with the strategic aim of establishing democracy for the working people. The economy itself should be geared to serve the people’s growing needs, and not to maximise the profits of the capitalists. The government should be accountable to the toiling people, and not dance to the tune of the biggest capitalists.

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2 years ago

Excellent interview, nicely put by Com. Mathew to stop the privatisation we have to unitedly fight all trade union and organisations must come together, it’s right time workers and people of the country must unite to stop this anti-worker anti-people plan

Sanjeewani Jain, Vice President, Lok Raj Sangathan
Sanjeewani Jain, Vice President, Lok Raj Sangathan
2 years ago

NMP had been very well explained by Dr. Mathew.
The government’s propaganda that it is not privatisation is completely fraudulent. It is indeed one of the worst forms of privatisation. Public investment, workers’ labour and super profits for the monopolies.
He has explained how after decades of use, many assets like machinery, buildings and so on become almost worthless.
In the case of land, the capitalists just refuse to return it.
Big capitalists have everything to gain and people have everything to lose through to he NMP!
Let us strengthen our fight against privatisation!