National Land Monetisation Corporation

The Government, led by Prime Minister Narendra Modi, has given the green light to establish the National Land Monetization Corporation (NLMC). This new organization is tasked with making the most of extra land and building assets owned by Central Public Sector Enterprises (CPSEs) and other government agencies. If you’re preparing for the IAS exam and want to learn more about the NLMC and its impact on the economy, this article has got you covered.

National Land Monetisation Corporation

The National Land Monetisation Corporation is like a dedicated organization created as part of the 2021-22 Union Budget.

Aims and Objectives:

The government plans to make money by selling its own land and surplus land from public sector undertakings (PSUs).
They aim to generate revenue by selling off land that’s not currently being used or is being underutilized, which belongs to the government or public sector entities.
This will help in selling off assets of PSUs that are no longer operating or are part of a strategic disinvestment plan, allowing the government to cash in on these assets.

Functions:

The government will establish a fully government-owned firm, which will serve as an advisory body.
This firm will be overseen by the Ministry of Finance, ensuring it operates effectively.
Initially, the firm will have ₹5,000 crore as authorized share capital, and ₹150 crore as paid-up capital.
Its main purpose is to assist other government entities and CPSEs (Central Public Sector Enterprises) in identifying surplus non-core assets and efficiently converting them into resources.

Working:

The company plans to bring in skilled individuals from the private industry based on their qualifications and abilities.
This choice is made because selling real estate assets demands knowledge in property valuation, market analysis, investment banking, land management, legal processes, and more.
The NLMC will handle the monetization process as one of its core responsibilities and aims to become a valuable resource for effective land monetization practices.

Challenges:

The success of the NLMC (National Monetization Pipeline) hinges on the government meeting its disinvestment goals, which could be tricky in uncertain times.
Identifying money-making opportunities from land assets, getting private investors to commit sufficient funds, and establishing a reliable dispute resolution system are key challenges.
Using Public Private Partnerships (PPPs) as a way to monetize assets might be a hurdle.
If only a handful of strong bidders show interest, it could result in less competition.

Benefits:

The establishment of the NLMC aims to fast-track the closure of government-owned companies and make the process of selling them more efficient.
This will also allow these idle assets to be put to good use through private sector investments, fostering new businesses like industries.
As a result, it will create job opportunities, boost the local economy, and generate funds for important economic and social projects.

What is Monetisation of Assets?

Asset monetization involves the government finding new ways to make money by tapping into the economic potential of public assets that aren’t being used to their full potential or are just sitting there unused.

How does it work?

When the government monetizes its assets, it’s like renting them out to private companies for a set period. In exchange, the government receives an initial payment, a portion of the money made from using the asset, a commitment from the private company to keep investing in it, and still owns the asset in the end.

Ways to Monetise government assets:

Real Estate Investment Trust (REIT): A REIT is like a company that owns and manages real estate properties. These properties can be anything from land to income-generating buildings like offices. It’s a way to make money from these spaces.

Public Private Partnerships (PPP) Model: The government can also make money by teaming up with private companies through the PPP model. They can monetize their assets, which means they can generate income by partnering with businesses to develop and manage public projects or properties.

Reasons for Asset Monetisation:

Governments use monetization to raise money and support their goal of achieving a $5 trillion economy. This process involves making the most of assets that are not being fully utilized, often by getting private investors or institutions involved. The funds generated from monetization can then be used to develop new infrastructure projects and create more resources for the future.