government announcement National Monetization Pipeline (NMP), a plan to transfer the rights to operate public infrastructure for a fixed period, has attracted media attention. Hopefully, in the skirmish over the details of the plan, not to mention the partisan accusations flying around, the fact India faces a serious infrastructure crunch and the imperative to address it will not be overlooked. We need the infrastructure not only to drive growth in a loose economy but also to lead a respectable life, even though we have seen the COVID-19 pandemic.
An important criticism of the NMP is that the transfer would create a monopoly, which would increase the price. Creating a monopoly through public policy would be an embarrassment, right. However, the claim of an unavoidable monopoly is exaggerated as results will vary by type of infrastructure.
Monopoly is inevitable in the case of highways and railway lines, whereas it is not in the case of warehouses as not all warehouses need to be sold to a single bidder. On the issue of pricing, NITI Aayog Vice Chairman Rajiv Kumar has emphasized that when the government signs a contract with the concessionaire, the price will be regulated and any increase in line with inflation.
Whether private parties would be open to such an arrangement is a different question. And that’s really the point. While the government may have announced its expectation of income from monetization, we are yet to ascertain the interest of the private sector in this. NITI Aayog has flagged the success of a public-private partnership (PPP) operating the Mumbai-Pune Expressway, but is unhappy with a major infrastructure company pulling out of the agreement to run the Delhi Airport Express rail link too early. Experience too. is on, causing interference. India’s experience with PPP in infrastructure has not been impressive, enthusiastically undertaken by both the United Progressive Alliance (UPA) and the National Democratic Alliance (NDA). This may have actually contributed to the troubled public sector banks with non-performing assets.
Much of the infrastructure comes as a public good, even if it is not a natural monopoly. No wonder it has been built and managed by the public sector around the world. But the possibility that the price may rise after the transfer of public infrastructure to the private sector is not a good reason to oppose it. India’s infrastructure has not expanded properly as the property generates very little revenue for their maintenance, let alone upgrades, due to pricing practices in the public sector. This has stunted the growth of the economy. Furthermore, it cannot simply be assumed that the monopoly will lead to a higher price. The outcome will depend on the cost to the concessionaire, which may be lower than that of public entities currently managing India’s assets. Comparing Air India fares with private airlines suffices to see this.
An important consideration in evaluating the NMP will be the amount of funds required to be generated. The government has declared a nominal value of ₹6 lakh crore earned in four years. This is exceptionally low with respect to the two comparators. First, it is actually only 10% higher than the budgeted capital expenditure of the Government of India for 2021-22. Next, look at it in relation to the estimated ₹100 lakh crore figure, as India needs infrastructure investment. This was announced by Finance Minister Nirmala Sitharaman in her first budget of 2019 and was reiterated by Prime Minister Narendra Modi in all his subsequent Independence Day speeches. Any claim of the novelty of the NMP is other than this meticulous estimate made by the government. As far as the negligence of the opposition is concerned, it diverts attention from the serious infrastructure crunch we face and the need to eradicate it.
Pulapre Balakrishnan teaches at Ashoka University, Sonepat, Haryana
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