The National Land Monetisation Corporation

What is the News?

The Union Cabinet has approved the creation of the National Land Monetisation Corporation (NLMC), the Special Purpose Vehicle(SPV) that the Finance Minister had announced in the Union Budget 2021-22.

What is Monetisation?

When the government monetises its assets, it essentially means that it is transferring the revenue rights of the asset (could be idle land, infrastructure, PSU) to a private player for a specified period of time. 

In such a transaction, the government gets in return an upfront payment from the private entity, a regular share of the revenue generated from the asset, a promise of steady investment into the asset and the title rights to the monetised asset. 

What are the ways to monetise Government assets?

There are multiple ways to monetise government assets:

In the case of land monetisation of certain spaces like offices, it can be done through a Real Estate Investment Trust (REIT) — a company that owns and operates a land asset and, sometimes, funds income-producing real estate. 

Assets of the government can also be monetised through the Public-Private Partnerships (PPP) model.

What is the need for Monetisation?

There are different reasons why the government monetises its assets: 

1) It is done to create new sources of revenue, 2) It is done to unlock the potential of unused or underused assets by involving institutional investors or private players, 3) It is also done to generate resources or capital for future asset creation such as using the money generated from monetisation to create new infrastructure projects.

What is the National Land Monetisation Corporation (NLMC)? 

Click Here to read about it 

How much land is currently available for monetisation? 

According to the Economic Survey 2021-2022, as of now, CPSEs have put nearly 3,400 acres of land on the table for potential monetisation. They have referred this land to the Department of Investment and Public Asset Management (DIPAM). 

In terms of government land, the Railways and Defence Ministries have the largest amount of government land in the country. 

What are the possible challenges for NLMC?

Firstly, the performance and productivity of the NLMC will depend on the government’s performance on its disinvestment targets. In FY 2021-22, the government has just been able to raise ₹12,423 crores so far through various forms of disinvestment.

Note: In the Budget 2021-22, the government had initially set a disinvestment target of ₹1.75 lakh crore, which was later brought down to ₹78,000 crores. 

Secondly, the process of asset monetisation does not end when the government transfers revenue rights to private players. Identifying profitable revenue streams for the monetised land assets, ensuring adequate investment by the private player and setting up a dispute-resolution mechanism are also important tasks. 

Thirdly, another potential challenge would be the use of Public-Private Partnerships (PPPs) as a monetisation model. For instance, the results of the Centre’s PPP initiative launched in 2020 for the Railways were not encouraging.

Source: This post is based on an article “The National Land Monetisation Corporation” published in The Hindu on 23rd March 2022.