Land Monetisation

WHY IN NEWS?

• The Union Cabinet recently approved setting up National Land Monetization Corporation (NLMC) to undertake monetization of surplus land and building assets of central public sector enterprises (CPSEs) and other government agencies.

WHAT IS LAND MONETISATION?

• Monetisation refers to the process of turning a non-revenue-generating item into cash.
• In the context of monetisation of public assets, it means the process of creating new sources of revenue for the Government and its entities by unlocking the economic value of un-utilised or underutilised public assets.
• A public asset can be any property owned by a public body, roads, airports, railways, stations, pipelines, mobile towers, transmission lines, etc. and land that remains un-utilised.
• Land Monetisation simply involves monetisation of surplus land and building assets. Monetising of land can either be by way of direct sale or concession or by similar means.

WHAT IS NATIONAL MONETISATION PIPELINE?

• National Monetisation Pipeline (NMP) is an asset monetisation effort by the Government.
• It will serve as a medium-term roadmap for identifying potential monetisation-ready projects across various infrastructure sectors.
• The total indicative value of NMP for core assets is estimated at Rs 6 lakh crore over the four-year period FY22 to FY25.

QUANTUM OF LAND

• At present, the government holds considerable surplus, unused and under-used non-core assets in the nature of land and buildings.
• Land holdings are one of the government’s most significant tangible assets, whether owned by central ministries, state governments, public sector undertakings or local bodies.
• Various estimates in the public domain peg the extent of land held by various government agencies in excess of 5 lakh hectares.
  • Ministry of Defence is the biggest government land-owner in the country. It owns about 17.99 lakh acres of land
  • Indian Railways (IR) is the second-biggest government land-owner in the country. According to available Government data, the total land available with the railways is 4.78 lakh hectares. Of which 0.51 lakh hectare is vacant.
  • India’s major ports — 12 in number — have among them about 110,000 hectare land.

HISTORY OF LAND MONETISATION IN INDIA:

• Various expert committees constituted over time by the government have suggested mechanisms and instruments for utilising unused land to finance infrastructure in India.
• Example:
  • Vijay Kelkar Committee on Fiscal Consolidation (2012) had recommended monetising the government’s unutilised and under-utilised land to finance infrastructure projects in urban areas.
  • Instruments such as land pooling, monetisation of underutilised/unutilised urban lands, land readjustment, land value capture were suggested as part of land-based financing systems.
• The absence of comprehensive inventory of public land was a major bottleneck.
• To get over this, the government started the process of making an inventory of its land in 2017.
• The Government Land Information System (GLIS), a first-of-its-kind centralised database created by the Ministry of Electronics and Information Technology (MeiTY) is being used to generate the land-holding data.
• The GLIS portal records total area, geo-positioning maps, and details such as ownership rights.

CURRENT STATUS OF MONETISATION IN INDIA:

• The NITI Aayog has identified two kinds of assets under the National Monetisation Pipeline:
• (a) Core Assets:
  • Assets which are central to the business objectives of such entity and are used for delivering infrastructure services to the public/users are considered as Core Assets.
  • Infrastructure asset classes such as transport (roads, rail, ports, airports), power generation, transmission networks, pipelines, warehouses etc. are the core assets.
  • Monetisation of core assets is steered by NITI Aayog
• (b) Non-core Assets:
  • The other assets, which generally include land parcels and buildings, can be categorised as non-core assets.
  • Monetisation of non-core assets is steered by the Department of Investment and Public Asset Management (DIPAM).
• The monetisation of the government's non-core assets is "limited" at present, with CPSEs having referred around 3,400 acres of land and other non-core assets to the DIPAM for monetisation.
• Monetisation of non-core assets of different CPSEs ie, MTNL, BSNL, BPCL, B&R, BEML, HMT Ltd, Instrumentation Ltd etc. is at present under various stages of the transaction, as per the Economic Survey for 2021-22.
• Six properties of state-owned telecom carriers Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) have been put up for bidding on the MSTC portal in November 2021, as the government has begun monetisation of non-core assets through auction.

WHAT IS NATIONAL LAND MONETISATION CORPORATION?

• The National Land Monetisation Corporation (NLMC) is being set up with the purpose of monetising surplus government-owned land.
• It is being set-up as a Special Purpose Vehicle (SPV) and will be set up as a wholly-owned Government of India company.
• It will have an initial authorised share capital of INR 5,000 crore and paid-up share capital of INR 150 crore.
• Nodal Ministry:
  • It will be set up under the administrative jurisdiction of the Department of Public Enterprise, Ministry of Finance.
• Composition:
  • A chairman will be appointed to head the NLMC through a ‘merit-based selection process.
  • The Board of Directors will comprise senior Central Government officers and eminent experts to enable professional operations and management of the company.
  • The Board of NLMC can also hire, pay and retain experienced professionals from the private sector.

ROLE OF THE NLMC:

• The National Land Monetisation Corporation will undertake monetisation of surplus land and building assets of Central Public Sector Enterprises (CPSEs) and other government agencies.
• It is expected to own, hold, manage and monetise surplus land and building assets of CPSEs under closure and the surplus non-core land assets of government-owned CPSEs under strategic disinvestment.
• It will also advise and support other government entities (including CPSEs) in identifying their surplus non-core assets and monetising them in a professional and efficient manner to generate maximum value realisation.
• It will hire professionals from the private sector just as in the case of similar specialised government companies like the National Investment and Infrastructure Fund (NIIF) and Invest India. This would be done as real estate monetisation requires specialised skills and expertise in areas such as market research, legal due diligence, valuation, master planning, investment banking and land management.
• It is expected that NLMC will act as a repository of best practices in land monetization.

SIGNIFICANCE LAND MONETISATION:

• Huge potential:
  • Huge portion of land are lying vacant with government agencies or are being utilised in an improper manner.
  • Various estimates in the public domain peg the extent of land held by various government agencies in excess of 5 lakh hectares.
• Enhance government revenue:
  • Proceeds from the monetisation of these assets will help generate additional resources, boosting government coffers. After all, land in and around prime areas can possibly generate substantial returns
• Stabilize land price:
  • Auctioning off surplus land will increase the supply of land, which may address the issue of the “artificial” scarcity of land that exists in certain areas.
  • This could depress prices and thus have a moderating effect on costs of projects.
• Realising the true value of disinvestment:
  • For CPSEs undergoing strategic disinvestment or closure, monetisation of these surplus land and non-core assets is important to unlock their value.
• Reviving the economy:
  • Prudent monetisation will help in reviving the Indian economy post-pandemic.
  • Monetisation will not only generate greater income for the government but will also encourage private investments and job creation.
• Increased social spending:
  • With additional revenue in hand, the government would be in a better position to spend on education, health and other social sector areas without raising debt for the same.

RATIONALE BEHIND CREATION OF NLMC:

• Identify the surplus land:
  • A detailed and comprehensive inventory of the state’s land holding will help it identify the surplus land, and push for monetising it.
• Create a database for potential investors
  • Properly marked land parcels with geographical identifiers, with their boundaries clearly demarcated, and with the legality of title well established, will provide greater clarity and certainty to private investors.
• Ensure more efficient monetisation drive:
  • Public sector entities hold vast tracts of land that are either unused and underused land.
  • As per reports, the total vacant land available with Railways is estimated at around 1.25 lakh acres. Similarly, the defence ministry also has considerable land holdings outside of the cantonment boundaries.
  • Thus, collating them under a single entity will lead to a more efficient monetisation drive, and better utilisation of these assets.
• Meeting Land Monetisation targets:
  • The corporation will help in meeting the target of the National Monetisation Pipeline.
  • The pipeline envisages to generate Rs 6 lakh crore through core assets of the central government over a four-year period from 2021-22 to 2024-25.
  • Top five sectors including roads, railways, power, oil and gas pipelines and telecom account for around 83% of the aggregate value.
• Bridge the skill gap:
  • Considering that land monetisation is a complex process, entrusting this work to a separate agency is the right way to go about it.
  • The desired skill set to take on the responsibility of management and monetisation of non-core assets in government is limited.
  • As the government itself has acknowledged, it requires “specialised skills and expertise” in areas such as “market research, legal due diligence, valuation, master planning, investment banking and land management.”
  • A separate entity, housed with professionals with specialised skills is better suited for this task.
• Efficiency enhancement:
  • The Corporation will fast track monetisation of land and non-core assets of public sector entities.
  • Thus enabling delivery of maximum outcome in minimum time.
• Attain international parity:
  • The SPV will carry out the monetisation of the land and other non-core assets in line with international best practices.
  • This would result in attracting greater investment into the projects.
• Flexibility in personnel management:
  • NLMC will have minimal full-time staff, hired directly from the market on a contract basis. 
  • Flexibility will be provided to the Board of NLMC to hire, pay and retain experienced professionals from the private sector; thus providing a greater degree of Flexibility in Personnel Management which is traditionally not available in government departments.

KEY CHALLENGES THAT NLMC MIGHT FACE:

• Lack of identifiable revenue streams in particular land assets
• Estimation of surplus land may be a contentious issue.
  • Ministries, departments, and public sector entities may be reluctant to demarcate land parcels as “surplus”
• Absence of clear titles
• Ongoing litigation
• Muted investor interest
  • There may be low interest among investors in remote land parcels.
• Dispute resolution mechanism
• Issue of the encroachment of government land to contend with

WAY FORWARD

• Evaluation of land under government:
  • There is need to evaluate the land holdings and prioritise those with significant market opportunities to unlock value in the short term.
• Transparency in functioning
  • The modalities of transferring the surplus land and buildings to NLMC should be duly finalised and released in public domain.
• Focus rural areas too:
  • There should be prudent emphasis on monetising land in rural regions as well.
  • This would help in driving greater investments and curb the rural-urban divide.
• Improving the land dispute resolution process
  • Government should also focus on improving the land dispute resolution process as many government lands are entangled by litigation.
  • Tools like Arbitration, Mediation etc.. can be leveraged for effective resolution.

PRACTICE QUESTION:

Q. How far the establishment of National Land Monetisation Corporation can be a game changer in the domain of public asset monetisation in India. Analyse