Why in News ?
Cabinet Committee on Economic Affairs has approved monetisation of assets of POWERGRID, a Public Sector Undertaking (PSU) under Ministry of Power, through Infrastructure Investment Trust (InvIT) model.
About the News
- This is the first time any PSU in Power Sector will undertake asset recycling by monetising its assets through the InvIT model and using the proceeds to fund the new and under-construction capital projects.
- Approval would help POWERGRID to monetise in the first lot, assets with gross block value of more than 7000 crore.
- Asset recycling is a key strategy of the Government of India to release the capital invested in operational assets.
POWERGRID
- Public limited company under the administrative control of the Ministry of Power, Government of India. It is a Maharatna company, engaged in the business of power transmission.
- Major Objectives are
- Undertake transmission of electric power through Inter-State Transmission System and all functions of planning and coordination relating to inter state transmission.
- Restoring power in quickest possible time in the event of any natural disasters like super-cyclone, flood etc.
- Ensuring the smooth flow of transmission systems and providing consultations in national and international level.
Infrastructure Investment Trust (InvITs)
- Direct investment of small amounts of money from possible individual/institutional investors in infrastructure to earn a small portion of the income as return.
- It was notified by SEBI in 2014 under Sebi (Infrastructure Investment Trusts) Regulations.
- The trust will raise funds for infrastructure development.
- InvIT consists of four elements : i) Trustee, ii) Sponsors, iii) Investment Manager and iv) Project Manager.
- Trustee : Inspects the performance of an InvIT is certified by Sebi
- Sponsors : Promote and refer to any organisation or a corporate entity with a capital of Rs 100 crore
- Investment manager : supervises assets and investments
- Project manager : Manages the execution of the project
How Infrastructure Investment Trust Model helpful ?
- POWERGRID meets its fund requirement for its Capital Expenditure (CAPEX) through its internal accruals and debt.
- For augmenting infrastructure investment budget 2019-20 emphasised investment led growth and indicated that new and innovative financial instruments including Infrastructure Investment Trusts (lnvITs).
- Sale of assets to InvITs is a way of accessing long term, relatively cheap finance required to fund infrastructure projects in Transmission Sector.
- The CAPEX plan of POWERGRID for next two years (2020-21 and 2021-22) is Rs. 20,500 cr.
Source : PIB
Topic
Prelims : PowerGrid, Infrastructure Investment Trust (InvITs)
GS III : 1. Infrastructure: Energy, Ports, Roads, Airports, Railways etc
2. Investment Model
Current Affairs Compilation : 9 September 2020