GAIL set to kick off asset monetisation in oil sector by end of 2021-22

InvIT to be floated by the end of next fiscal year

The first oil-sector infrastructure investment trust (InvIT) is expected to be floated by GAIL (India) by the end of 2021-22. According to a top petroleum ministry official, Indian Oil Corporation (IOCL), Hindustan Petroleum Corporation (HPCL), and GAIL (India) will be going for three separate InvITs as part of the central government’s asset monetisation plan.

“GAIL (India) will be the first to float the InvIT. In all, Rs 15,000-20,000 crore is expected to be raked in via this route. The money will be utilised by the companies for capital expenditure,” said the official. This is expected to augur well for the companies since any extra money in their kitty is usually given to the Centre in the form of dividend.

HPCL and GAIL (India) will be floating InvITs for their pipelines, while IOCL will be hiving off its hydrogen-producing units and pipelines into an InvIT. 

An InvIT is like a mutual fund that allows multiple small and large investors to invest in a project and get proportional returns from the profits the asset makes.

“Since there is no dilution of equity, it is not a disinvestment process. The companies and the government retain control of their assets while raising money. This money will remain with the companies for funding their future infrastructure development plans. A Cabinet approval for this will be taken soon,” added the official.

In her Budget speech, Union Finance Minister Nirmala Sitharaman had said, “Debt financing of InvITs and real estate investment trusts (REITs) by foreign portfolio investors will be enabled by making suitable amendments to the relevant legislations. This will further ease the access of finance to InvITs and REITs thus, augmenting funds for the infrastructure and real estate sectors.”

Dividend payment to REITs and InvITs is also exempt from tax deducted at source to ease the compliance burden.

Sitharaman further said a national asset monetisation pipeline of potential brownfield infrastructure assets would be launched. An asset monetisation dashboard would also be created for tracking the progress and provide visibility to investors.

Assets of the National Highways Authority of India, Power Grid Corporation of India, Airports Authority of India, freight corridors of Indian Railways, warehousing assets of central public sector enterprises, and sports stadia, among others, were also mentioned by Sitharaman for asset monetisation.