Under the Central Government’s asset monetization scheme, the National Land Monetization Corporation (NLMC) has made key recommendations for monetizing government assets worth around Rs. 5,000 crore that are lying unused and idle. A plan of action for this was given shape at the corporation’s 21st Board of Directors meeting held last Friday (Sept. 18).
Thousands of acres of land and buildings held by various central public sector enterprises and government departments have remained unused for years, lying idle as “inactive capital.” The primary objective is to sell these assets or lease them out on a long-term basis and use the funds raised for the development of the country’s basic infrastructure.
Deep impact: This move is not merely about selling land; it is a strategy to stimulate the country’s macroeconomic cycle. Officials are explaining its technical and economic impacts in detail.
Result: When the Central Government diverts this Rs. 5,000 crore to infrastructure capital expenditure, its economic value will be 2.5 to 3 times higher. In other words, when this fund is invested in roads, ports, and power generation, it will stimulate economic activity worth about Rs. 12,500 crore to Rs. 15,000 crore, say officials from the Union Finance Ministry.
‘‘Many public sector enterprises that are not very profitable or have been shut down (for example, BSNL, MTNL, HMT) own large tracts of land. By monetizing these through NLMC, the debt burden of those companies will be reduced, and banks’ non-performing assets (NPAs) will also come down.
When the government’s capacity to generate tax revenue is within a certain limit, such “non-tax revenues” greatly help keep the government’s fiscal deficit under control. This reduces the government’s need to borrow at high interest rates.
“In a situation where demand for land is high in urban and suburban areas, when government lands come onto the market, the shortage of land needed for logistics parks, special economic zones, and commercial complexes will be eased,” say officials.
The key challenge in monetizing assets is determining their true market value. It has been found that NLC is using certain strategies for this. The details are as follows:
Land measurement digitization: Precisely mapping land boundaries using drones and Geographic Information System (GIS).
Accurate valuation: Determining the value of the land using the discounted cash flow method based on future cash flows and comparable market valuation (CMV).
Electronic auction: A transparent electronic auction system is followed to create a level playing field among investors and generate maximum revenue.
“The government may consider strategies to involve retail investors in this project through modern financial structures such as real estate investment trusts, rather than selling some assets outright,” say experts in the field.
“This ₹5,000 crore initiative by the National Land Monetization Corporation is seen as an important milestone that will add strength to the Indian economy. If implemented properly, this scheme could emerge as an inexhaustible lifeline that generates the capital needed for India’s infrastructure development,” say analysts.
Challenges before the government
Although the asset monetization plan is economically sound, the central government faces several practical and structural challenges in implementing it:
Land ownership: In India, land records have not been fully digitized in many places. Encroachments on government land, boundary disputes with state governments, and resolving pending court cases are major challenges.
Land-use conversion: Many government lands are classified as “industrial” or “public use.” The legal complications faced by local bodies in converting these for commercial or residential use need to be eased.
Market attractiveness: In the current high-interest-rate environment, there is doubt whether real estate companies or private investors will be willing to invest thousands of crores. The success of the auction will depend on the financial position of the investors.
State cooperation: Since land falls under the State List, the full cooperation of state governments in providing stamp duty concessions and approvals is essential to the success of this project.