GAIL’s pipelines first on block under National Monetization Pipeline

Government to kick off ambitious plan by leasing out 2,229 km of gas pipelines

The government’s ambitious ₹6 lakh crore 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.

Finance minister Nirmala Sitharaman on August 23 unveiled plans to raise ₹6 lakh crore between FY22 and FY25 by leasing several assets to the private sector as part of a National Monetization Pipeline. (HT archive)

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

Finance minister Nirmala Sitharaman on August 23 unveiled plans to raise ₹6 lakh crore 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 natural 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 about 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, another 5,925km of its pipeline 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.

Emails sent to spokespeople for NITI Aayog, which prepared the NMP plan, and GAIL remained unanswered.

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

“The plan is to convert these assets into special purpose vehicles (SPVs) and then bring in investors through the InvIT route. Investment banks have already submitted proposals for conducting the overall monetization plan,” the person cited above said.