A 6 Billion Dollar Monetization Plan

Monetization is an ambiguous concept. In general, monetization can be seen as a process of transforming something tangible into immaterial money. 

But when you go to the brass rods, it can mean many things. Take land parcels, for example.

You can build up an asset and make money. You can monetize that asset. Or you rent it out. Or you can sell it. 

At this point, the story becomes a little more interesting. In this case, every time you monetize an asset, you pull money out of an idle asset. Use the word “monetization” if you want more context.

The Indian government wants to raise Rs 6 billion lakh crore ($8.1 billion) by monetizing state-owned land for roads and stadiums. The easiest way to do this is to sell the land for cash, but it is running out of wood.

However, this is not a practical solution. Consider the difficulty of selling a piece of road. The privatization of national motorways could be started, but this would burden many people at the same time. 

The alternative is to borrow, monetize, and sell fixed-value assets. But most state assets, especially state-owned enterprises, are riddled with debt, and no one wants to touch them with a barge. So I would consider that.

By selling the roads, you transfer the toll rights and assets to a private entity. They sign an agreement setting tolls for a certain period of time, and then the rights remain with the private company, which specifies other important details. In return, the company is required to provide cash in advance.

This will give the government a much-needed financial reprieve and free it from the obligation to maintain the roads. A significant portion of the proceeds will go to new infrastructure projects. Contrary to popular belief, this is not a fire sale.

It is his cunning ploy to unlock the value of assets that have not been optimally used. As the government has already indicated, it is talking about monetizing its assets. 

Here’s what the government will do with it. One wonders what other assets the government will sell later. They have the power transmission capacities that are invitations. Invitations sound like a complicated financial instrument. But that’s not all. 

They will take these useful assets for power transmission and transfer them into a trust. Once this has been done, they will sell shares in the Trust Fund to potential investors and beneficiaries of all kinds.

In this case, it is an initial public offering, and investors receive cash when the assets generate money. In the meantime, the government gets money upfront. If you have the money, you can put one of the units into the trust and pay a sweet dividend at the end of the year. 

This will make a major contribution to improving public finances. This is a win-win situation for all parties as there is no sale involved. The government has plots of land, guest houses, and other properties that can be used well. The goal is to identify these assets and find appropriate ways to unlock the value and do so on a time-bound basis. 

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