BackNew model to monetize pipelines on cards
The idea of monetizing gas pipelines through a TSO was considered earlier, but it did not make much progress.
PremiumNew Delhi: The Centre is considering creating a transport system operator (TSO) — which could be a corporate entity or a special purpose vehicle —to hive off and monetize the gas pipelines assets of state-run GAIL.
A person aware of the development said the TSO may be formed either under the ministry of petroleum and natural gas or as an arm of GAIL.
“The concept of TSO is being looked at wherein the gas pipelines of GAIL may be brought under the new entity, which may either be under the ministry or GAIL. If this model is eventually adopted all the pipelines would be shifted to the entity only after the projects under the national gas grid are completed," the person said, adding that both the government and the PSU are trying to find viable modes of monetization.
“It is being considered and GAIL is likely to come up with a proposal for the same," added the person.
The TSO, if put in place, may manage the common carrier part of the gas pipeline infrastructure. It would be entrusted with the task of booking pipeline capacity for transport of gas from producers to the consumers on payment of a fee to be decided by the regulator. The proposed TSO structure may house assets from across energy PSUs, said another person, adding that the government may later sell its stake in it.
Queries sent to the ministry of petroleum and natural gas, GAIL and Department of Investment and Public Asset Management (DIPAM) remained unanswered till press time.
The idea of monetizing gas pipelines through a TSO was considered earlier, but it did not make much progress.
Monetization of oil and gas assets have not picked up as energy companies found the initial option of forming Infrastructure Investment Trust (InvIT) to be an expensive way of raising capital.
Following this, the government agreed to shelve the plan but told them to come up with alternatives. The companies told the ministry that with high credit ratings they can raise capital easily and at a lower cost, which would be beneficial compared to the returns they would have to offer InvIT investors.
On 3 November, 2022, Mint reported that the petroleum ministry has ordered state-run oil and gas companies to go back to the drawing board after failing to come up with “comprehensive“ plans to monetize their assets.
The government’s ambitious asset monetization plan was announced in the union budget for FY22 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.
In terms of gas pipelines, the assets considered for monetization during FY22-25 include pipelines with an aggregate length of 8,154 km, of which 7,928 km are from the existing operational pipeline assets and the rest 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 crore, according to NITI Aayog.
Currently the country has about 17000 km long natural gas pipeline network which is operational in the country, additional 15,500 km pipelines are are at various stages of development under the ‘One Nation One Gas Grid’ initiative to create the national gas grid.
The monetization of GAIL’s pipeline assets gains significance as it is India’s biggest natural gas marketing and trading company and owns over 70% of the country’s gas pipeline network.
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