GAIL submits new InvIT proposal to monetise Rs 5,000-crore assets

The last PPPAC meeting was in December, according to its website and there is no clarity on when the next one will be held

After highways and power infrastructure, the next sector of government-owned infrastructure that might be monetised through the infrastructure investment route (InvIT) could be gas pipelines, with GAIL (India) submitting a proposal to monetise about Rs 5,000 crore, Business Standard has learnt.

This comes after an earlier proposal by GAIL for an InvIT was asked to be refined and reconsidered by the Public Private Partnership Appraisal Committee (PPPAC) as GAIL wanted to keep operational control of the pipeline projects in question.

“GAIL has submitted a fresh proposal after taking into account the feedback in the PPPAC meeting in August 2021,” said an official with knowledge of the matter. The new proposal could be taken up in the next PPPAC meeting, which comprises officials from the Finance Ministry’s Department of Economic Affairs, Niti Aayog, Department of Public Enterprises and infrastructure line ministries.

LINED UP

• GAIL proposes to launch InvIT for two pipeline projects
• Plans to monetise assets worth Rs 5,000 crore
• Earlier proposal was approved ‘in-principal’ but GAIL was asked to rethink some provisions
• The PSU wanted to keep operational control of InvIT
• Matter of conflict of interest was raised by Niti Aayog
• FinMin said GAIL keeping control defeats the purpose of bringing in private sector efficiency

The InvIT proposal is for the Dabhol-Bengaluru and Dahej-Uran-Panvel-Dabhol pipelines for monetisation worth Rs 5,000 crore under the Rs 6-trillion National Monetisation Pipeline. In a meeting of PPPAC in August 2021, an ‘in-principal’ approval was given. However, GAIL had said it would create a special purpose vehicle and transfer the pipelines to the SPV, and create the InvIT. It said the assets will be handed back to GAIL after completion of economic life of the projects. Creating the SPV and the InvIT will allow it to keep operational control.

However, according to the minutes of the August meeting, led by Economic Affairs Secretary Ajay Seth, it was observed that the question of transferring assets does not arise as under the NMP, assets will continue to be owned by the government and PSUs with private sector participants just operating them for a fixed period of time.

In the meeting, representatives from Niti Aayog also raised the issue of GAIL being the investment manager and “possible conflict due to GAIL being both the sponsor of the project and also its user”. Additionally, an official from DEA said that since the operation and management of the InvIT will be with GAIL, “there is no scope for private sector efficiency”.

The last PPPAC meeting was in December, as per its website and there is no clarity on when the next one will be held. The Finance Ministry has been nudging various infrastructure line departments and there have been close examination on InvITs in various infra ministries. The Centre is looking to launch a couple more sector-specific InvITs in the current fiscal year.

An InvIT is a collective investment scheme similar to a mutual fund, which enables direct investment of money from individuals and institutional investors in infrastructure projects to earn a small portion of the income as return. While many private sector InvITs are listed in BSE and NSE, the two InvITS floated by state-owned companies are National Highways Infra Trust and the PowerGrid Infrastructure Investment Trust.