State-owned GAIL and Hindustan Petroleum
According to persons familiar with the subject, Indian Oil may abandon a proposed pipeline monetisation proposal after convincing the petroleum ministry that it would be an expensive method to obtain funds.
The government anticipated that the businesses will transfer part of their pipes to independent infrastructure investment trusts (InvITs) and sell minority holdings in them to raise Rs. 17,000 crore. According to the persons described above, the firms have assured the government that their strong credit ratings, which are among the finest in the country, would allow them to obtain cash quickly and at a considerably lower cost than whatever return they would have to pay InvIT investors.
The monetisation plan, announced in the budget last year, aimed at freeing up resources that might subsequently be used in new projects, so boosting investment in an economy dragged down by the epidemic.
The pipeline monetization idea is no longer on the table, one of the above-mentioned individuals stated. People familiar with the situation stated that oil and gas industries had rejected the plan from the outset since pipelines were crucial to their operations.
They stated that the InvIT model is suitable for the road sector, where the cost of capital is high, but it is not suitable for state-owned oil and gas companies.
For more than a year, the oil ministry, oil firms, and Niti Aayog have been debating the monetization proposal. Niti Aayog, the government agency entrusted with developing asset-monetization strategies for state-owned enterprises, recommended creating InvITs to house some oil and gas pipelines.
According to a National Institution for Transforming India (NITI) Aayog official, the petroleum ministry's mission is to identify assets that may be monetized, while the Aayog's job is to guarantee that the ministry meets its objectives.
With the monetization plan on hold, the government is considering whether all businesses' oil and gas pipelines may be handled by a third party or shared, according to the individual quoted above, referring to telecom firms that do this with towers.
Natural gas pipelines often enable third parties to utilise some of their capacity, whereas crude and refined product pipelines are solely used by their owners.
Gas Authority of India Limited (GAIL's) Dahej-Uran-Panvel-Dabhol pipeline and Dabhol-Bengaluru pipeline, totaling 2,000 km, were to be monetised first through the InvIT channel, according to the original design. GAIL had produced a thorough strategy and submitted it to the government for approval some months ago.
InvITs, which primarily contain income-generating operational infrastructure assets such as toll roads and bridges, are considered as appealing products by investors seeking consistent income.
For oil and gas businesses, InvIT would have been a trade-off between present and future cash flows because the share sale would have yielded funds but they would have had to start paying an operational charge for utilizing the assets.