Mission Land Monetisation

Did you know that the defence ministry and Indian Railways are sitting on nearly 30 lakh acres of land between them? Also, that the central public sector undertakings (PSU) are holding a large amount of surplus, unused and under-used noncore assets including land and buildings with potential to generate trillions of rupees in revenues?Well, the government has for some time been thinking of monetising these assets to unlock their value particularly in case of CPSUs undergoing strategic disinvestment or closure. 

After announcing its intentions to monetise surplus land in this year’s Union Budget, the government in March set up the National Land Monetisation Corporation (NLMC) for undertaking monetisation of surplus land and building assets of not just central public sector enterprises (CPSE) but also other government agencies. NLMC has the mandate to execute the monetisation of land, which can be through direct sale or concession. So how will NLMC go about it? By when will it finish the job? What will be the role of private entities in NLMC?

Defence & Railway Land

The defence and railway ministries possess the largest parcels of land. Thankfully, most of the surveying and cataloguing of defence land parcels was concluded earlier this year by the Directorate General Defence Estates (DGDE). It completed the exercise of surveying 17.78 lakh acres of defence land. We now know that out of 16.38 lakh acres of defence land, about 18,000 acres is state hired land. This may get transferred to state government departments, sources say. 

A dozen or so major Indian ports also hold more than one lakh hectares of land. Most of this has been leased to government departments -- whether state government or central agencies. NLMC will be needed to tackle these issues first. Which means NLMC will have to end up hiring experts from the private sector as well.

Let us look at the land lying with the railways. Of course, the share of the railways is much less (around 11.8 lakh acres of land) compared to defence. Also, vacant land belonging to the railways is only around 1.25 lakh acres, mostly in the form of narrow strips along railway tracks (kept for future expansion). As per an official estimate, the railways have around 43,000 acres of vacant land (meant for commercial utilisation). This would be the area of focus for NLMC.

At the same time, there are railway land parcels that are being utilised for revenue generation through commercial development by a specialised agency called the Rail Land Development Authority (RLDA). As on date, RLDA is commercially developing 85 land parcels covering an area of 254.33 hectares, confirms Ved Parkash Dudeja, Vice Chairman, RLDA. “We are developing 1,000 commercial sites. Besides station redevelopment, RLDA has other key mandates. These include colony redevelopment, development of multi-functional complexes and leasing of commercial sites that will fuel economic growth in the respective geographical regions,” says Dudeja.

So, what will be the role of NLMC and how different it will be from RLDA? According to Dudeja, more clarity is awaited and therefore one must wait. However, government sources say some sort of a coordination wing will be built into the functioning of NLMC and RLDA with each knowing their respective area of the vacant land. “NLMC will mostly concentrate on CPSEs and their land. There are about a dozen railway PSUs. May be NLMC will closely look at those land parcels falling under the railway PSUs,” a senior official involved with the matter says. More on RLDA and its work later. First, let us deep dive into what NLMC would be doing?

Decoding NLMC

NLMC will have an initial authorised share capital of Rs 5,000 crore and paid-up share capital of Rs 150 crore. It will be directly under the Ministry of Finance. Going forward, the Department of Public Enterprise, Ministry of Finance, will set up the company and act as its administrative ministry. 

The NLMC board will comprise senior government officers and experts. NLMC will also have a chairman as well as nongovernment directors to be appointed through a merit-based selection process. Experts say this will allow for some sort of participation from the specialists in the private sector. There are more than half a dozen foreign-aligned real estate consultancy service providers who mostly execute what NLMC is envisaged to do, but for the private sector. 

“Real estate monetisation requires specialised skills and expertise in areas such as market research, legal due diligence, valuation, master planning, investment banking and land management. Private entities may be engaged for this,” says a senior official.

Modelled After RLDA?

While there is not much clarity yet on the constitution, functioning, timelines, legal hurdles, among other challenges facing the operationalisation of NLMC, it is being guessed that the inspiration would be the Rail Land Development Authority (RLDA) which was established on 1 November 2006. RLDA is a statutory authority, under the Ministry of Railways, set-up by an amendment to the Railways Act, 1989 for development of railway land.

 If modelled on the lines of RLDA, NLMC will have a clear organisational structure, budget, and mandate. It has taken RLDA more than 15 years to reach the current stage with FY2019-20 turning out to be its best. It is learnt that NLMC will have a minimal full-time staff on a contract basis. And funds would be provided for meeting those expenses. “Flexibility will be provided to the Board of NLMC to hire, pay and retain experienced professionals from the private sector,” the government said. Let us hope NLMC is able to achieve its goals and help generate revenue as envisaged.