The government has signaled its commitment to unlocking private capital for the power sector and grid assets.
The Central Electricity Authority (CEA) has circulated a detailed concept note on asset monetization to the Forum of Regulators.
The initiative finalizes the regulatory blueprint for state electricity commissions to adopt and implement the plan for their intrastate transmission assets.
The concept note focuses on creating a predictable and attractive environment for investors, specifically addressing critical issues like revenue certainty and tax implications. These concerns were among those raised by state transmission utilities and investors following the initial policy announcement.
The AOMT monetization model:
The framework is built around the acquire, operate, maintain, and transfer (AOMT) public-private partnership (PPP) model. Key operational steps outlined in the document include:
Tariff Certainty: Establishing a clear tariff determination framework for monetized assets to ensure predictable cash flow over the concession period. This is crucial for assets historically managed under the less stable Regulated Tariff Mechanism (RTM).
Asset Ring-fencing: Requiring RTM assets to undergo a systematic demerger process into separate Special Purpose Vehicles (SPVs) to legally ring-fence them for monetization.
Transparency: Mandating the appointment of external experts, including technical consultants for due diligence and independent valuers for fair financial assessment, ahead of the competitive bidding process.
The AOMT model is not privatization. It involves the temporary transfer of operational rights to a private entity for a defined period (e.g., 10-15 years) in exchange for an upfront lump sum. Ownership remains with the public sector, with a mandatory buy-back at a nominal cost at the end of the term.
Policy roots: NMP and guiding principles
The monetization drive began with the National Monetisation Pipeline (NMP), which was launched by Union Finance Minister Nirmala Sitharaman in August 2021. The NMP targets monetizing brownfield assets across infrastructure sectors to finance new greenfield projects.
Following this, the Ministry of Power (MoP) issued its “Guiding Principles for Monetization of Transmission Assets” in October 2022. This document introduced the AOMT model as the preferred mechanism for both central and state utilities, with the explicit goal of making efficient capital available for the huge investment needed to strengthen India’s power grid, especially to support the increasing integration of renewable energy.
With the CEA now providing the final operational roadmap, the focus shifts to state regulators and utilities to launch the first set of monetization bids to unlock the much-needed capital.
