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Insolvency and Bankruptcy Code
The Insolvency & Bankruptcy Board of India (IBBI) Regulations also came out in 2016. There is a clear code of conduct for the creditors’ committee that steers the resolution process, stipulating timelines that must be adhered to. After initial successes involving large accounts and large sums, the system has been beset with low resolution rates, long delays and huge haircuts in the values realized. New issues encountered pertaining to cross-border and group insolvency, services companies and leased assets will need definitive resolution. Resolution Professionals and Asset Reconstruction Companies need to be far more effective. Clearly, the system isn’t working well enough yet.
National Monetization Pipeline
Accelerating business warrants that our infrastructure be upgraded significantly. The Government of India recently announced a National Monetization Pipeline (NMP) of 6 lakh crores. This involves brownfield projects, where the revenue rights, not ownership, would be transferred to qualifying private sector entities for further development. Roads, railways and power assets would comprise the majority of NMP assets. The rest would include telecom, mining, transportation, natural gas, petroleum, warehouses and stadia. The expectation is that these assets will perform better, realize better yields and appreciate in value when they’re privately run. Funds generated from NMP would be used for new infrastructure projects. It’s an idea whose time has come, despite naysayers who argue that national assets are being pawned cheaply. That said, as the recently launched initiative involving privatization of trains or the slow pace of the Air India sale has shown, capturing private sector investments will be a challenge, emanating from a fear that rules could suddenly change. Fresh thinking will help.
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