Explained: Why The Government Has Set Up National Land Monetisation Corporation

The Union Cabinet on 9 March approved the setting up of National Land Monetisation Corporation (NLMC) as a wholly-owned government of India company to undertake monetisation of surplus land and building assets of Central Public Sector Enterprises (CPSEs) and other government agencies.

What are non-core assets?

The assets held by the government/public sector entities/statutory bodies broadly include operational/under-construction projects, land, buildings, investment in subsidiaries/joint ventures, etc.

From amongst these, assets which are central to the business objectives of such entities and are used for delivering infrastructure services to the public/users are considered as core assets. The core assets include asset classes such as transport (roads, rail, ports, airports), power generation, transmission networks, pipelines, warehouses etc.

The other assets, which generally include land parcels and buildings, can be categorised as non-core assets.

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.

The Ministry of Defence (MoD) is the biggest government land-owner in the country. It owns about 17.99 lakh acres of land, of which 1.61 lakh acres of land is located within 62 notified cantonments across the country and about 16.38 lakh acres of land outside the cantonments, as per the records maintained by the Directorate General Defence Estates (DGDE). Out of the 16.38 lakh acres land, about 18,000 acres is either state hired land or is proposed for deletion from records on account of transfer to other government departments.

DGDE has completed the exercise of surveying the 17.78 lakh acres of defence land in 2022. This is for the first time post Independence the entire defence land was surveyed in coordination with revenue authorities of various state governments using the latest survey techniques.

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 (11.80 lakh acres) of which 4.27 lakh hectares is under operational and allied usage while around 0.51 lakh hectare (1.25 lakh acres) is vacant.

This vacant land is mostly in the form of narrow strips along tracks and utilised for servicing and maintenance of track, bridges and other infrastructure. The vacant land is also utilised for execution of various infrastructural projects for meeting future growth needs of the railways which include projects like doubling/tripling and traffic facilities works, etc.

Vacant land which is not required by the railways for its immediate operational use is also utilised to generate revenue through commercial development on a long term lease basis by the Rail Land Development Authority (RLDA), wherever feasible. RLDA has been entrusted with 85 land parcels covering an area of 254.33 Hectare for commercial development as on date.

India’s major ports — 12 in number — have among them about 110,000 hectare land. Large portions of land belonging to major ports are under lease with various departments of the central and state governments.

History

Various expert committees constituted over time by the government and interest groups have suggested mechanisms and instruments for utilising unused land to finance infrastructure in India.

One of the earlier initiatives was the report of the Committee on Roadmap for Fiscal Consolidation. The committee headed by former finance secretary Vijay Kelkar which submitted its report in 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) and monitored by the Prime Minister’s Office (PMO) 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

While the monetisation of core assets is steered by NITI Aayog, the initiative for monetisation of non-core assets has been hitherto 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.

BEML, a Defence PSU Company, has identified surplus land in Karnataka — around 123.39 acres in Bengaluru and 401.23 acres in Mysore — which will be demerged and subsequently monetised during the strategic disinvestment process. HMT Limited which is under closure has also earmarked land of around 89.506 acre in Bengaluru for monetisation.

In November, 2020, DIPAM had signed an agreement with the World Bank for advisory services on non-core asset monetisation. The World Bank advisory project, approved by the finance minister, was aimed at analysing public asset monetisation in India and benchmarking its institutional and business models against international best practices, as well as supporting development of operational guidelines and capacity building for their implementation.

Why the new company?

The Union Minister for Finance in her Budget speech 2021-22 had announced setting up of a Special Purpose Vehicle (SPV), with capacity and expertise, to carry out the monetisation of the land and other non-core assets in an efficient and prudent manner, in line with international best practices.

In July 2021, as part of reorganisation ahead of the cabinet expansion, the Department of Public Enterprises (DPE), which had been part of the Ministry of Heavy Industries and Public Enterprises, was made the sixth department of the Finance Ministry. The DPE was subsequently allotted the task of spearheading the government’s monetisation drive of non-core assets such as land and buildings of central public sector enterprises through an SPV.

The Economic Survey for 2021-22, tabled in Parliament in January 2022, also underscored that the desired skill set to take on the responsibility of management and monetisation of non-core assets in government is limited.

The cabinet's approval for setting up NLMC comes pursuant to the budget announcement and the recent changes in the DPE.

What to look forward to?

Monetisation of non-core assets envisages unlocking of value of these thus far unutilised or underutilised assets and generate returns on the equity that the government has invested in them.

The latest initiative to monetise non-core unused and under-used assets would help the government generate substantial revenues. This will also enable productive utilisation of these under-utilised assets to trigger private sector investments, new economic activities boost local economy and generate financial resources for economic and social infrastructure.

For CPSEs undergoing strategic disinvestment or closure, monetisation of these surplus land and non-core assets is important to unlock their value. NLMC will support and undertake monetisation of these assets.