The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, in a path-breaking reform, has approved the monetisation of assets of POWERGRID (PGCIL), a Public Sector Undertaking (PSU) under the Ministry of Power, through Infrastructure Investment Trust (InvIT) model. This is the first time any PSU in Power Sector will undertake asset recycling by monetizing its assets through the InvIT model and using the proceeds to fund the new and under-construction capital projects.
This approval is expected to help POWERGRID to monetise in the first lot, assets with a gross block value of more than Rs 7000 crore. These assets, which are mainly High Voltage Transmission lines and substations, are held by POWERGRID in the form of Special Purpose Vehicles (SPVs). The proceeds from the asset monetisation would be deployed by POWERGRID in their new and under-construction projects.
According to the notification issued by the CCEA, “asset recycling is a key strategy of the Government of India to release the capital invested in operational assets, and the proposed InvIT of POWERGRID would attract both domestic as well as global investors including Sovereign Wealth Funds. Sale of assets to InvITs is a way of accessing long term, relatively cheap finance required to fund infrastructure projects in the Transmission Sector. The CAPEX plan of POWERGRID for the next two years (2020-21 and 2021-22) is Rs 20500 crore. The Government of India has enacted an enabling regulatory and taxation framework for InvITs and the proposed InvIT by POWERGRID would deepen this market.”
The InvIT would provide an opportunity to the general public and institutional investors such as Pension Funds, Mutual Funds, to benefit from this investment opportunity and participate in the growth of the Indian Infrastructure Sector, it added.
The Budget 2019-20 emphasized investment-led growth and indicated that new and innovative financial instruments including Infrastructure Investment Trusts (lnvITs), have been launched as part of the brownfield asset monetization strategy for augmenting infrastructure investment.