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The Financial Express

Saving money from worn-out assets


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In a welcome move, the government has initiated the process of formulating a policy to dispose of various types of assets at the end of the economic lives of those, "aiming to increase revenue and save money spent on maintaining such assets". This makes sense. Currently, the government's procurement allocation is approximately US$25 billion per annum, which is around 37 per cent of the total procurement budget of $67 billion.

A disposal policy, when enacted, would provide specific guidelines for the safe disposal of assets at the end of project periods while they still have market value. Again, in the absence of specific guidelines, a lot of tangible assets are dumped in inventory where pilferage and degradation (decay due to improper storage) make many items like office electronic goods and vehicles practically useless when they are finally put up for auction. There is a cabal of intriguing elements that pick up valuable items for a pittance for refurbishment in private workshops for resale to parties / individuals for handsome profits. Why would the authorities allow for merchandise, immovable / movable items, automobiles and other items to be sold by private hands when they can sell those themselves? When one takes into account the cost of storage, the whole idea of having a policy to govern sale of these assets is the best option.

Assets will be broken down by category in the policy, so as not to have any confusion. Government procurement is significant because it encompasses everything from construction materials to office equipment to transport vehicles and a myriad of other assets that are used in the various developmental projects the State undertakes every year. Invariably, every project has a timeline and once that ends, government agencies are left straddled with a host of products that will no longer be needed. Because a new project, in our country, has budgetary provision for new equipment. Once this policy is formulated and if it is implemented properly, the government could actually find that a lot of these assets would be useful in new projects. That would invariably save hundreds of millions of dollars in new procurement - funds that are allocated from the exchequer, which could be saved. One should not be impatient about such things because the stated policy is still in a draft mode right now. Indeed, there is likely to be a pushback effect from a host of business interests which stand to lose out from this policy. And it will be interesting to see if the government can actually implement it fully.

Regardless of the outcome, the policy needs to be adopted because not only would it save the government money, but it entails safe disposal of material that are beyond salvage value. Presently many items find their way to government dumping yards and there is a cost for their upkeep, which is basically a waste of additional resources. Indeed, going by a report published in this paper on January 16, a lack of uniform guidelines to govern these goods, it is presently not possible for the authorities to ascertain salvage value, market value, and hence impossible to know what assets can be transferred to other projects. Valuable physical land is occupied due to dumping, land which could be used for other purposes, be it for constructing offices or other infrastructure projects. As pointed out in the report "this policy will help the entities to define standard, method or restrict disposal of public assets in a legal, accountable and effective manner."

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