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The Centre proposes to prod states to initiate asset monetisation of state public sector enterprises (PSEs) by setting up specialised asset management (AMC) and asset reconstruction companies (ARC).

The idea is to expand the scope of government's asset monetisation exercise and enable state entities to unlock value for the next round of the investment that will help generate growth and employment.

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 assets lying with 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 to maximise value of assets of PSEs. Similarly, exercise is now being thought as state level, where state specific AMC/ARC could do the same thing for local enterprises.

As per the plan being finalised by the Centre, assets may first be transferred to the proposed SPV which will then devise a plan to improve it before finding a strategic buyer and completing the transaction.

Earlier speaking to IANS, disinvestment department 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.

This would also mean that states, which are unable to undertake asset monetisation on its own, could consider taking the help of the Central SPV. In any case, both central and state SPV are proposed to work in close coordination to see that state assets get maximum value.

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 disinvestment department DIPAM has already asked all government bodies and PSEs to identify a list of assets that needs to be monetised. These would then be transferred to the SPV that will help improve the assets so that 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 strategic investors.

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

It is envisaged 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.

Though asset monetisation in plan in bits have been undertaken in the past and few PSEs have initiated 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 state asset that would be sold off.