Oil PSUs plan asset monetisation through InvITs

25 Mar 2021 CW Staff

As part of the programme, gas transportation utility Gail India is expected to set up the gust InvIT in the oil sector in the next financial year (FY). The proposed InvIT will house some of the gas pipeline infrastructure created by the company.

The Ministry of Petroleum and Natural Gas (MoPNG) told the media that this would help Gail to mobilise over Rs 20,000 crore through this route that could help develop new pipeline infrastructure that would help the country develop a gas-based economy.

Two other oil PSUs—Indian Oil Corporation Ltd (IOCL) and Hindustan Petroleum Corporation Ltd (HPCL), may also set up InvIT later. While HPCL and GAIL will focus on monetising their pipeline infrastructure through the investment trusts, Indian Oil proposes to do so in the case of its hydrogen-producing units as well as product pipelines that would be hived off into an InvIT.

The investment trust scheme may be new for the oil sector, but power sector transmission utility Power Grid Corporation has already put some of its assets for monetisation under the InvIT set up by it earlier. Other large PSUs will also be encouraged to take this route. Asset monetisation is an important aspect of the disinvestment exercise for FY22.

An InvIT is an investment vehicle created to hold income-generating and operational infrastructure assets such as roads, power transmission lines, and gas pipelines. These are like mutual funds. Instead of financial securities, InvITs hold bankable assets with long-term contracts with strong counterparties that provide a steady cash flow over the long term.

Image Source

Also read: Infrastructure ministries list assets for monetisation

Also read: GAIL may split, to launch InvIT

After the power sector PSUs, the country's oil sector PSUs would now float an infrastructure investment trust (InvIT) as a part of the government's asset monetisation programme and mobilise resources for new capital investment. As part of the programme, gas transportation utility Gail India is expected to set up the gust InvIT in the oil sector in the next financial year (FY). The proposed InvIT will house some of the gas pipeline infrastructure created by the company. The Ministry of Petroleum and Natural Gas (MoPNG) told the media that this would help Gail to mobilise over Rs 20,000 crore through this route that could help develop new pipeline infrastructure that would help the country develop a gas-based economy. Two other oil PSUs—Indian Oil Corporation Ltd (IOCL) and Hindustan Petroleum Corporation Ltd (HPCL), may also set up InvIT later. While HPCL and GAIL will focus on monetising their pipeline infrastructure through the investment trusts, Indian Oil proposes to do so in the case of its hydrogen-producing units as well as product pipelines that would be hived off into an InvIT. The investment trust scheme may be new for the oil sector, but power sector transmission utility Power Grid Corporation has already put some of its assets for monetisation under the InvIT set up by it earlier. Other large PSUs will also be encouraged to take this route. Asset monetisation is an important aspect of the disinvestment exercise for FY22. An InvIT is an investment vehicle created to hold income-generating and operational infrastructure assets such as roads, power transmission lines, and gas pipelines. These are like mutual funds. Instead of financial securities, InvITs hold bankable assets with long-term contracts with strong counterparties that provide a steady cash flow over the long term. Image Source Also read: Infrastructure ministries list assets for monetisation Also read: GAIL may split, to launch InvIT

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