Plan to monetise IOCL, HPCL & GAIL pipelines loses steam, Auto News, ET Auto

Plan to monetise IOCL, HPCL & GAIL pipelines loses steam
The plan to monetise oil and gas pipeline assets of Indian Oil Corporation (IOCL), gas utility GAIL (India) and Hindustan Petroleum Corporation (HPCL) has lost steam due to lack of investor interest and reluctance of the companies to part stake, according to executives and investment bankers.

Finance minister Nirmala Sitharaman in the 2021 Union Budget had announced the monetisation of oil and gas pipeline assets of IOC, GAIL and HPCL.

Following the announcement, the oil companies drafted a blueprint to monetise stakes in their pipeline networks through infrastructure investment trusts (InvITs). The InvITs were to house pipelines totalling 5,000 kilometres, wherein the companies may have offloaded 26-49% of their stakes in these projects.

InvITs act as investment vehicles housing infrastructure projects of companies that allow investors to make small investments and receive regular income. InvITs, popular internationally, are considered stable cash-generation assets, an attribute foreign pension funds look for.

Plan to monetise IOCL, HPCL & GAIL pipelines loses steam
“The plan has not gone the way it was envisaged. The investor community is not excited about oil and gas pipeline assets as much as it is about green energy,” said an investment banker aware of the plan.

IOCL, GAIL and HPCL did not reply to an email till press time.

Asset monetisation is considered critical not only to attract investment into the infrastructure sector but also for bringing about a paradigm shift in infrastructure augmentation, service delivery and maintenance. The pipeline assets are usually backed by long-term customer relationships, ensuring cash-flow stability.

The operational network of natural gas pipelines in India spans about 16,900 km. An additional 18,363 km of natural gas pipeline network is under construction. Hence, the natural gas grid of India is estimated to expand to 35,263 km in the next three to five years.

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