There is no single silver bullet for dealing with NPA problem: Jayant Sinha


In an interview with Supriya Shrinate of ET Now, Jayant Sinha, MoS, Aviation, talks about a range of options for dealing with NPAs and that a bad bank could also be an option worth considering. He also says that investment is happening, but in new sectors.

Edited excerpts:

Its one year of GST and obviously the government is in a big celebratory mode. The opposition believes it was not a very well laid out GST and the rates are too high. In the hindsight, do you believe the government could have done it differently? In your present capacity, you are trying to push ATF under the GST. How hopeful are you of that going through?

We are hopeful that ATF will get included in GST. That will be the economically right decision to make. We have to get the states on board. The central government obviously has been advocating that all petroleum products should come under GST. That is exactly why the constitutional amendment included petroleum products and we had set the trajectory for that and hopefully we will get there once the states are on board.

But overall, I would say that GST has been outstanding success. We are getting revenues of up to Rs 1 lakh crore a month which is a very robust growth from where we were earlier. We have added 45-50 lakh new indirect tax payers which is a stunning growth in the number of indirect tax payers.

The most remarkable thing about GST is the effect it has on formalisation of the Indian economy. The EPFO numbers that are being added to payrolls in a formal way is growing every month. It is showing a very strong and robust progress. People are gradually settling into and using the GST forms and understanding how to do that and that is making us more competitive, efficient and enabling further growth. GST is a signature reform for this government. Never before in human history has this level of tax reform been attempted in such a large country and implemented so successfully within a year.

GST was meant to be a game changer. I am glad it is at least turning out to be one after its initial teething troubles. The other part of your reform drive has been to clean up Indias toxic public sector banks and the idea of a bad bank seems to be back on the table. Could this add to the multiple layers of cleaning up banks?

I would caution anyone on looking for just one silver bullet. The reality of the NPA situation in India is we have to do a host of different things. There is a lot of work which we started doing some years ago when I was in the Ministry of Finance and that has progressed very well. We are looking at the various sectors and seeing what can be done to heal those sectors and ensure that those sectors are vibrant once again.

We attempted that in steel and steel has turned around and the NPA situation has abated there. We are looking at what we can do with power assets. Clearly, there are things we need to do in real estate as well. So, we have to look at the underlying sectors and try and improve the health that is one thing.

Second, we have to get the ARC process to work well and clear the markets.

Three, we have to get the insolvency in bankruptcy code working. It has now started to work and we have to get resolution there.

Four, there may be ways in which we can see whether we can create a bad bank, good bank type combination. In Air India, that is exactly what we did. I brought over my experience from the Ministry of Finance to see whether we can do that in Air India and maybe we can follow that up with IDBI as well.

In Air India, we took a whole host of assets — the non-core real estate, the art and the artefacts, some of the debt, Centaur Hotels, Alliance Air and several of these assets and we put them into Air India Asset Holding Company. That enabled us to create a clean efficient well run airline on the other side. So, we separated it. Now, if we have a bad bank and the good bank combination, that becomes a much more attractive proposition.

So, these are the fout things that we have attempted. When we look at the situation with NPAs, let us not just look for one silver bullet. There is a range of options we have to consider and potentially the bad bank could be also an option that may be worth considering. The policy makers are looking at this and will take the right decision in the interest of the economy.

There cannot be just one silver bullet and there have to be many options but all of this is geared towards one aim and that aim is to make industry begin investing to deleverage balance sheets and clean up banks so that they can begin lending. When do you think that is going to happen?

I disagree with that entire idea. I disagree because every time we have a new growth cycle, it is led by new industries and that is the way any modern day economy works. Today many sectors are seeing massive investments. Swiggy got a large investment right now and became the newest entrant to the unicorn club. So food delivery is getting huge investments. We just saw the investment of Walmart into Flipkart. A massive investment is happening in logistics, in building supply chains, in procurement and so on. Rivigo is another unicorn that has now become the largest purchaser of trucks in India. So, investment is happening.

Perhaps investment is happening in different sectors

That is how growth happens. New sectors come up. The aviation is a great example and you do not see the investment in aviation showing up in the investment numbers because all the planes are leased. We have massive orders for planes coming up. We have over 900 planes on order right now that is billions and billions of dollars. We have lakhs of crores invested in airports as well. So, investments are happening, it is just that they may not happen in the sectors that we were looking at previously because that is like looking in the rear view mirror. We have to look out the windshield and see where the growth is happening.

But given the kind of sectors that are now drawing in investments, are interest rates largely becoming irrelevant? For Swiggy to raise funds and be a unicorn, it does not matter what RBIs interest rates are, whereas for a steel company to set up a new project it remains relevant. Do you believe that the high interest rates regime that we are entering, is largely irrelevant?

Interest rates are obviously important for capital intensive industries or for debt financing and consumer purchases. Perhaps, more important, are real interest rates. Though the important question for India now is the real cost of capital going up, because easy money policies of the central banks in the develop world is now changing. That will mean we have to be careful in India as the cost of capital is going to go up, not so much because inflation is going up but because the entire paradigm is shifting.

You started off this interview by saying that this was market dynamics that perhaps did not see so much of investor interest do you believe some of that market dynamics some of that sentiment has been marred by questioning of Air Asia or summoning of Tony Fernandes? Is this kind of institutional activism once again taking a toll on investments?

I cannot speculate on why people choose to bid or not bid. I really cannot get into that as I said the consolidated feedback from the transaction adviser suggest that it was really market circumstances, industry dynamics that inhibited bidding.

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