In its Union Budget for 2021-22, the Centre had announced that several of its core assets will be rolled out for financial fruition under the Asset Monetisation Programme.
While the Government has earmarked several blue-chip sectors under this programme, in the energy sector, oil and gas pipelines of Gas Authority of India Ltd, Indian Oil Corporation Ltd and Hindustan Petroleum Corporation Ltd are to be monetised.
The Government plans to generate Rs 17,000 crore through monetising the abovementioned assets in the current fiscal (2021-22).
To achieve this aim, Gas Authority of India Ltd has identified two pipelines and is in the process of setting up an infrastructure investment trusts or InvITs for the purpose.
Indian Oil has identified two hydrogen plants and a pipeline for monetising while Hindustan Petroleum too has initiated action to identify assets for monetisation.
What is Asset Monetisation Programme?
In the Union Budget for 2021-22, the Government had proposed to launch a ‘National Monetisation Pipeline’ to assess the potential value of under utilised and unused government assets. To keep the whole process transparent, an asset monetisation dashboard was proposed to be created to track the progress and provide visibility to investors.
Soon after the Budget, the Prime Minister had said that the plan is to monetise 100 government and PSU-owned assets worth Rs 2.5 lakh crore for ‘investment opportunity’. The plan is to continue for the next five years.
As part of this ambitious plan, the Ministry of Road Transport and Highways has been set a target to raise Rs 30,000 crore through asset monetisation over the next three years, while other key economic ministries including the Petroleum Ministry too have been given such ambitious targets.
What are InvITs?
To achieve success under the Asset Monetisation Programme, the Government is looking at the Infrastructure Investment Trusts or InvITs route.
Under InvITs, the land assets are transferred to a trust providing investment opportunity for institutional investors.
InvITs are collective investment vehicles, similar to a mutual fund, which enables direct investment of money from individual and institutional investors in infrastructure projects to earn a small portion of the income as return.
InvITs enable developers of infrastructure assets to monetise their assets by pooling multiple assets under a single entity (trust structure). In India, InvITs are governed by SEBI (Infrastructure Investment Trusts) (Amendment) Regulations, 2016.
InvITs are fast becoming a preferred route for private equity investors to hold operating infrastructure assets and for infrastructure developers to monetise their investments in these projects.