Bad Bank: Modi government may look at AMC/ARC model for asset monetisation programme

The government may consider asset management and asset reconstruction company model to monetise non-core assets of public sector enterprises (PSEs).

AMC and ARC or a bad bank has been proposed for the banking sector in Budget 2021-22 to acquire, manage and turnaround bad loans. The budget also talked about asset monetisation to unlock the true value of the assets lying with the government entities.

The plan now is to create a special purpose vehicle (SPV) under the government route that could take the shape of an AMC/ARC and help maximise the value of the assets of the PSEs.

Assets may first be transfer to the proposed SPV which will then devise a plan to improve them before finding a strategic buyer and completing the transaction.

Speaking to IANS earlier, DIPAM secretary Tuhin Kanta Pandey had said that the SPV could look at monetising non-core assets of PSEs that are unable to undertake the work on their own and help them realise better value for assets that are unutilised or underutilised or are just lying idle without generating any revenue.

Asset monetisation is the process of creating new sources of revenue for the government and its entities by unlocking the economic value of unutilised 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. or even land that remains unutilised.

The DIPAM secretary said that while the contours of the asset monetisation SPV is still to be worked out, it has asked all government bodies and PSEs to identify a list of assets that need to be monetised. These would then be transferred to the SPV that will help improving the assets so as to maximise its value in the monetisation exercise.

With regard to land to be under monetisation, the plan is to create a central portal that could act as a land bank housing information about all such assets that have been lined up for utilisation by the strategic investors.

Sources said the AMC/ARC model for asset monetisation would work as it can help in maximising the value of public assets, thereby give better returns to the government and the PSEs. Certain assets may need to be improved before putting them up for auction. This work can be taken up by the AMC which can then put the asset up for sale and complete the transaction.

Pandey said that only non-core assets may be taken over by the proposed SPV and it would basically support smaller PSEs or those with inadequate infrastructure to undertake monetisation on their own. Larger entities like the Railways or other PSEs can continue on their own to monetise assets.

The Railways already has the Rail Land Development Authority (RLDA) for creating assets for Indian Railways through the development of vacant railway land for commercial use to generate revenue using non-tariff measures.

Though asset monetisation in bits has been undertaken in the past and few PSEs have initiated the exercise on this front, the government has given importance to this plan this year in the Budget and is actively looking to create a vast pool of state assets that would be sold off.
Govt may look at AMC/ARC model for asset monetisation programme
By Subhash Narayan
 (08:26) 
New Delhi, Feb 21 (IANS) The government may consider asset management and asset reconstruction company model to monetise non-core assets of public sector enterprises (PSEs).

AMC and ARC or a bad bank has been proposed for the banking sector in Budget 2021-22 to acquire, manage and turnaround bad loans. The budget also talked about asset monetisation to unlock the true value of the assets lying with the government entities.

The plan now is to create a special purpose vehicle (SPV) under the government route that could take the shape of an AMC/ARC and help maximise the value of the assets of the PSEs.

Assets may first be transfer to the proposed SPV which will then devise a plan to improve them before finding a strategic buyer and completing the transaction.

Speaking to IANS earlier, DIPAM secretary Tuhin Kanta Pandey had said that the SPV could look at monetising non-core assets of PSEs that are unable to undertake the work on their own and help them realise better value for assets that are unutilised or underutilised or are just lying idle without generating any revenue.

Asset monetisation is the process of creating new sources of revenue for the government and its entities by unlocking the economic value of unutilised 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. or even land that remains unutilised.

The DIPAM secretary said that while the contours of the asset monetisation SPV is still to be worked out, it has asked all government bodies and PSEs to identify a list of assets that need to be monetised. These would then be transferred to the SPV that will help improving the assets so as to maximise its value in the monetisation exercise.

With regard to land to be under monetisation, the plan is to create a central portal that could act as a land bank housing information about all such assets that have been lined up for utilisation by the strategic investors.

Sources said the AMC/ARC model for asset monetisation would work as it can help in maximising the value of public assets, thereby give better returns to the government and the PSEs. Certain assets may need to be improved before putting them up for auction. This work can be taken up by the AMC which can then put the asset up for sale and complete the transaction.

Pandey said that only non-core assets may be taken over by the proposed SPV and it would basically support smaller PSEs or those with inadequate infrastructure to undertake monetisation on their own. Larger entities like the Railways or other PSEs can continue on their own to monetise assets.

The Railways already has the Rail Land Development Authority (RLDA) for creating assets for Indian Railways through the development of vacant railway land for commercial use to generate revenue using non-tariff measures.

Though asset monetisation in bits has been undertaken in the past and few PSEs have initiated the exercise on this front, the government has given importance to this plan this year in the Budget and is actively looking to create a vast pool of state assets that would be sold off.