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MUMBAI : The government’s ambitious 6 trillion monetization programme will be kicked off by leasing out more than 2,229km of gas pipelines of GAIL (India) Ltd to the private sector, a person directly aware of the development said.

The government has already begun appointing investment advisers for the proposed transaction, and several domestic and foreign investment banks have shown initial interests.

The plan is to monetize these assets by floating an infrastructure investment trust (InvIT), a collective investment vehicle where investors can put in funds and earn a portion of the income as returns.

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Finance minister Nirmala Sitharaman on 23 August unveiled plans to raise 6 trillion between FY22 and FY25 by leasing several assets to the private sector as part of a National Monetization Pipeline, or NMP.

According to the person cited above, the government believes that of all the assets headed for monetization, GAIL’s pipelines have the strongest demand from private investors at the moment.

In a recent presentation, government think tank NITI Aayog said GAIL has contributed to the growth and development of the gas pipeline infrastructure and natural gas market and has an existing gas pipeline network of 13,389km, with a capacity of 204 million standard cu. m per day (mmscmd).

The plan is to monetize 8,154km of such pipelines.

It said GAIL has been operating at 49-52% capacity utilization levels in recent years, and although the cross-country pipelines report higher capacity utilization levels, the overall utilization is still sub-optimal. For FY22, two pipelines with a total length of 2,229km—Dabhol-Bengaluru pipeline and Dahej-Uran-Panvel-Dabhol pipeline—have been identified for monetization. For FY23-25, an additional 5,925km of GAIL’s pipeline assets have been considered for monetization.

“In the natural gas transmission sector, there is a precedence of InvIT-based structure, when India Infrastructure Trust, an infrastructure investment trust sponsored by Brookfield, took over 100% ownership of 1,375-km-long Kakinada to Bharuch natural gas pipeline from a private sponsor for a period of 20 years against an upfront consideration," the think tank said.

“Next in line are the power transmission lines and the National Optical Fibre Network, also known as BharatNet," said the person cited above.

A spokesperson for NITI Aayog said “as identified under the Union Budget 2021-22 and also included in the NMP, pipelines (natural gas as well as product) are being considered for monetization. The CPSEs and ministry are presently in the process of evaluating various models, including InvIT, to arrive at the optimal structure for monetization for such pipelines".

An email sent to a spokesperson for GAIL remained unanswered.

Several large companies in India have created public and private InvITs to monetize their assets similarly.

For example, Reliance Industries Ltd concluded a 25,215 crore sale of its telecom tower assets to a private infrastructure trust sponsored by Canada’s Brookfield Asset Management last year.

“The plan is to convert these assets into special purpose vehicles (SPVs) and then bring in investors through the InvIT route," the person said.

The government’s list for monetization includes 26,700km of roads, 90 passenger trains, 400 railway stations, 28,608 circuit km transmission lines, 286,000km of BharatNet fibre network and 14,917 towers owned by Bharat Sanchar Nigam Ltd and Mahanagar Telecom Nigam Ltd.

In FY22, the target is to raise 88,000 crore through this process. The plan, however, has drawn criticism from opposition parties, with the Congress party describing it as “legalized loot and organized plunder".

“A new-age product like InvIT is a key enabler to achieve the aspirational monetization target set by the government and, I believe, such innovations would significantly improve the financial ratios of the underleveraged infrastructure projects, eventually leading to a positive re-rating for the sector," said Sandeep Upadhyay, managing director (infrastructure advisory) at Centrum Capital.

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