What are the main sources of income of a government? Its main sources of income are always different kinds of taxes, duties, fees and other kinds of nontax revenues including profits and dividends earned from public sector units, and pubic assets, loans and aids. Government income is always related to the growth of the economy.
If the economy grows the government income will also grow. If the economy slows government income will also slow. Is there some connection of the National Monetization Pipeline (NMP) with government income? Yes. In her budget of 2021-22, Finance Minister Nirmala Sitharaman announced NMP to raise Rs. 6-lakh crore over next five years for new infrastructure.
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Earlier there was a grand drive for demonetization. The new move is for monetization. The shocking effects of demonetization are still lingering in our economy. But the NMP is not yet discussed much though it bears serious consequences for our economy. This needs to be discussed and debated more.
It is very intriguing to observe how certain vocabularies are used in academic and political parlance these days. Let us take the examples of the terms ‘disinvestment’, ‘privatization’ and ‘monetization’. These are three different terms, but if you put them in context and follow their trail they all mean the same thing- that is a process of privatization.
What is the stated purpose of NMP? What do they want to do by NMP? Through this, the government has identified certain public assets to be handed over to private parties on the lease of 25 to 30 years. These include over 26,700 kilometers of highways, 400 railway stations, 90 passenger trains 4 hill railways.
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Then there are public sector infrastructures in telecoms, power transmission and distribution and petroleum, petroleum products and national gas pipelines and etc. What is the argument of the government for monetizing these public assets? The government says that these assets are lying fallow and are not being properly used and monetized.
These need to be put to proper use and monetized. And government feels that this can only be done by private parties. Should we buy this argument? When the government headed by the incumbent Prime Minister is boasting so much about good governance and efficiency why should it not be able to energize these assets and get the maximum benefit out of them?
What stops the government from putting them to their best use? The government has not answered this question. The next thing is the period of leasing. Twenty-five or thirty years is a long period of time. Leasing an asset for 30 years is as good as selling it. The difference is when you sell it you can ask for the maximum price and when you lease it out you have to satisfy yourself with a measly amount.
Eminent economist, Kaushik Basu has commented that if it is unavoidable it is better to sell off a public asset at its true value than leasing out for a long period at a throwaway price. The government needs money to invest in infrastructure, but it has no other option than to lease out its precious assets for a long period.
It is very difficult to digest this argument. It only means one thing- the present government has failed miserably in managing its economy. It is in fact in the throes of a fiscal crisis and it has no other alternative to meet this crisis except leasing out these entities.
Apart from its adverse consequences, it is also utterly shameful and disgraceful for the government that it has to raise money by leasing out its assets. To me, NMP is a national disgrace. Now let us think about its consequences. First thing, these assets are all public facilities. The moment the ownership of these assets is transferred to the private parties; the general public will have to pay higher fees for the use of these facilities.
It is obvious because the new owners of the assets-the private parties will try to maximize their profit from these. It took years to build these assets by spending public money and now they are being handed over to private parties at cheap prices which will charge a hefty amount from the public for their use.
How sad and tragic is this! There is another more serious consequence than this. India is already witnessing the worst ever unemployment problem. This problem will be further aggravated by the NMP. To maximize profit the new owners of the assets will surely go for automation for running and managing the assets. As a result, so many people will lose jobs. In the absence of government regulation and in the name of labor reform they will also reduce the wages of the employees.
Thus NMP will help the crony capitalists to maximize their profits at the cost of the common man. Another aspect of the NMP is that all the assets and entities will go either to the hands of Adani or Ambani. This has emerged as a dangerous trend in our economy.
This monopoly or you may call it duopoly will hit the consumers because their choice will be limited. This will also affect the job market because the unemployed youths will have nowhere to go seeking jobs.
Kaushik Basu has said in no uncertain terms that this does not happen even in capitalist economies like the US. Even they don’t encourage monopolies. In India, under the present regime, it is in our lot to suffer like this.