Cabinet nod for asset monetisation of subsidiaries of PGCIL through InvIT model

This is the first time any PSU in the power sector will undertake asset recycling

Cabinet Committee on Economic Affairs, CCEA, Prime Minister Narendra Modi, Monetisation of assets, Power Grid Corporation of India, PGCIL, Public sector undertaking, Ministry of Power, Infrastructure Investment Trust (InvIT), Under-construction capital projects, High voltage transmission lines, Substations, Special Purpose Vehicles, Maharatna company, Tariff-based competitive bidding

The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, has approved monetisation of assets of the Power Grid Corporation of India (PGCIL), a public sector undertaking (PSU) under the Ministry of Power, through the Infrastructure Investment Trust (InvIT) model.

This is the first time any PSU in the power sector will undertake asset recycling by monetising its assets through the InvIT model and using the proceeds to fund new and under-construction capital projects.

The approval will help PGCIL to monetise in the first lot assets with gross block value of more than Rs 7,000 crore.

These assets, which are mainly high voltage transmission lines and substations, are held by PGCIL in the form of special purpose vehicles (SPVs). The proceeds from the asset monetisation will be deployed by PGCIL in their new and under-construction projects.

PGCIL, a public limited company under the administrative control of the Ministry of Power, government of India, started its commercial operation in 1992-93 and is today a Maharatna company, engaged in the business of power transmission.

The company, along with its wholly-owned subsidiaries acquired through the tariff-based competitive bidding (TBCB) process, owns and operates a pan-India transmission network. The company meets its fund requirement for its capital expenditure (capex) through its internal accruals and debt.

The Budget 2019-20 emphasised investment-led growth and indicated that new and innovative financial instruments including lnvITs have been launched as part of the brownfield asset monetisation strategy for augmenting infrastructure investment.

The 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 PGCIL for the next two years (2020-21 and 2021-22) is Rs 20,500 crore.

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