Oil sector PSUs to set up InvITs for asset monetisation


After power, the country’s oil sector PSUs would now float an infrastructure investment trust (InvIT) as part of the asset monetisation exercise announced by the government and mobilise resources for fresh capital investment.

As part of the exercise, gas transportation utility Gail India is expected to set up the gust InvIT in the oil sector in the next financial year. The proposed InvIT will house some of the gas pipeline infrastructure created by the company.

Oil ministry officials said that this will help Gail to mobilise over Rs 20,000 crore through this route that could be helpful in developing new pipeline infrastructure that would help the country in developing a gas-based economy.

Two other oil public sector undertakings (PSUs), HPCL and IndianOil, may also set up InvIT at a later stage. While Gail and HPCL will focus on monetising their pipeline infrastructure through the investment trusts, IndianOil proposes to do so in the case of its hydrogen-producing units as well as product pipelines that would be hived off into an InvIT.

An InvIT is an investment vehicle created to hold income-generating and operational infrastructure assets such as roads, power transmission lines, and gas pipelines. These are like mutual funds and instead of financial securities InvITs hold bankable assets having long-term contracts with strong counterparties that provide a steady cash flow over the long term.

The investment trust route may be new for the oil sector but power sector transmission utility PowerGrid has already put some of its assets for monetisation under the InvIT set up by it earlier. Other large PSUs
will also be encouraged to take this route.

Asset monetisation is an important aspect of the disinvestment exercise for FY22. Though this normally does not provide the Centre with large gains on PSU assets, it helps the entries to start a fresh capex cycle based on fund mobilisation through the route.