Extracts from letter of E A S Sarma — 15/06/2022 https://countercurrents.org/2022/06/asset-monetisation-counter-productive-analyse-before-you-rush-into-it/
.. NITI Ayog has proposed that gas pipeline assets valued at ₹24,462 crore should be monetised by the Gas Authority India Ltd. (GAIL) to raise additional resources.
https://www.livemint.com/industry/infrastructure/govt-asks-oil-psus-to-come-up-with-monetization-plan-11655236473972.html In the last financial year, GAIL paid dividends to the tune of Rs 2220 Crores, out of which the finance Ministry has benefitted to the extent of Rs 1,142 Crores. As a well-rated CPSE with the backing of its owner, the government, it can raise additional funds, if necessary, at a much lower cost, compared to the highly devious route of monetising its assets to a private company with a lower credit rating, without the backing of the government. This will also force GAIL to lose control over those assets for no valid reason. Has your Ministry, with the support of the excellent team of economists at its command, ever tried to analyse the merit of such a bizarre proposal?
The government ...strip(s) the CPSEs of the bulk of the internal surpluses generated by them, by insisting on their paying high dividends. and also ask the CPSEs to lose control over their assets through monetisation,.. ... The idea that “additional resources” would accrue through disinvestment is an illusory one, as even those resources would have to come only from the same pool of savings from which the government borrows. The difference is that such disinvestment proceeds would not only come on less advantageous terms but also it would force the government/ CPSE to lose control over the assets.
In all, the CPSEs provided dividends, mostly to the government, to the extent of Rs 15,237 crores during 2020-21 ( https://www.newindianexpress.com/business/2021/oct/28/govt-gets-rs-15237-crore-dividends-from-cpses-so-far-this-year-2376687.html ). Experience with the privatisation of the CEL and Pawan Hans has shown that most disinvestment adventures end by handing over such excellent CPSEs to non-descript companies with highly dubious antecedents.
The tragedy with the CPSEs today is that the government, their owner, has failed to identify the strategic ones among them and charter a well thought out vision aimed at building self-reliance for the country. CPSEs such as the CIL and the ONGC are required to utilise their surplus internal resources by reinvesting the same in exploring and developing greenfield deposits to be able to enlarge the natural resource base and make the country self-reliant, rather than becoming unduly dependent on imports. Unfortunately, the government has not been able to empower them sufficiently so as to enable them to discharge that responsibility, as a result of which the country has since become heavily dependent on both oil and coal imports. Had the government realised the strategic importance of such CPSEs, it would not have drained their internal resources by forcing them to give dividends at the expense of their being able to adopt a more sustainable long-term vision.
E A S Sarma, Former Secretary to Govt of India,
Visakhapatnam