Relevance: GS-3: Indian Economy and issues relating to Planning, Mobilization of Resources; Infrastructure;

Key Phrases: Asset Monetisation Plan; Infrastructure Pipeline; disinvestment plans; NITI Aayog’s National Monetisation Plan;

Why in News?

• The MoPNG (Ministry of Petroleum And Natural Gas) has asked state-run oil and gas companies to come up with new plans for asset monetization.

Key Highlights

What are InvITs?

• These are institutions on similar lines of mutual funds.
  • As they pool investment from various categories of investors to invest the pooled amount into completed and revenue-generating infrastructure projects, thereby creating returns for the investor.

How are InvITs regulated?

• These are regulated under the
  • SEBI (Infrastructure Investment Trusts) Regulations, 2014 and
  • Indian Trust Act, 1882

What are the benefits of InvITs?

• Ensures investment in various infrastructure projects.
  • These include roads and highways, electricity generation, and distribution as well as electronic communications networks.
• Deepens the financial instruments as household savings are invested into it.
• These are professionally managed by project managers. Hence, they don’t require investors to look into the working of the company.
• Tax exemptions help the investors from remaining invested in the financial market.
• As most of the project is completed, the risk is small.

Investments into Oil PSUs

• Other options being looked at include monetization of receivables.
• The government has asked the companies to submit their plans within 15 days, the official added.
• The Oil PSUs noted that it will be more expensive for them to generate revenue through InvITs and hence the government agreed to shelve their plans.
• As these PSUs have higher credit ratings, they can raise capital easily and at a lower cost.
  • This is different in the case of NHAI (National Highway Authority of India), which has many assets but it doesn’t have much creditworthiness.
  • Hence, it makes more business sense for NHAI to generate capital from InvITs.
• Oil PSUs must be creative in terms of monetization and raising more capital from different avenues.
  • As the government has refused to revise the targets of revenue generated from Oil PSUs.

Asset monetization plan

• This ambitious plan was released in the Budget 2021-22 to increase financial resources for the National Infrastructure Pipeline.
• The total indicative value of the national monetization pipeline for core assets of the central government has been estimated at ₹6 trillion over the four-year period of FY22-25.

For Gas Pipelines

• The assets considered for monetization during FY22-25, include pipelines with an aggregate length of 8,154 km.
• Out of this 97% are from the existing operational pipeline assets and the rest are from pipelines that are expected to become operational during the period.
• The total value of natural gas pipeline assets considered for monetization was estimated at ₹24,462 crores, according to NITI Aayog.

For Petroleum Products and LPG Pipelines

• A total of 3,930 km of petroleum product and liquefied petroleum gas (LPG) pipeline were also identified for monetization during FY22-25
  • 3,196 km are product pipeline assets and
  • 733 km are LPG pipeline assets
• Hindustan Petroleum Corp. Ltd’s (HPCL) Mangalore-Hassan pipeline (LPG pipeline) was identified for monetization during FY23.

This monetization pipeline has been developed by NITI Aayog in consultation with infrastructure ministries, based on the mandate for asset monetization under the Union budget for FY22.

Challenges

• The push for alternative ways to monetize assets comes at a time the country’s financial woes have increased amid the Russia-Ukraine war
• The government is also set to lose about ₹1 trillion with the latest excise duty cut on petrol and diesel.
• The disinvestment plans of the government have also encountered hurdles, with the BPCL (Bharat Petroleum Corporation Ltd) privatization unlikely to take place this fiscal.

Source: Live-Mint

Mains Question

Q. What are InvITs? How are these beneficial for revenue generation? Explain National Asset Monetisation Plan and its challenges vis-a-vis Oil PSUs?