CEA Outlines Framework For Monetizing Public Transmission Assets Under AOMT Model

The Central Electricity Authority (CEA) under the Ministry of Power has recently shared a concept note with the Forum of Regulators to outline the key aspects for monetizing public sector transmission assets. This proposal comes under the Acquire, Operate, Maintain, and Transfer (AOMT) model, which is a Public Private Partnership (PPP) framework introduced through guiding principles issued by the Ministry in October 2022. The model allows the temporary transfer of public transmission assets to private entities for a defined period, aiming to enhance efficiency and unlock the financial value of existing infrastructure.

According to the concept note, the initiative involves multiple complexities that need careful consideration before implementation. One of the main areas of focus is the tariff structure of the assets and the impact of taxes during the process of transfer. The model requires a systematic process starting from identifying the assets suitable for monetization. For those assets that come under the Regulated Tariff Mechanism (RTM), a demerger process will have to be carried out to create a separate Special Purpose Vehicle (SPV). Once the SPV is formed, it must obtain a license from the respective State Electricity Regulatory Commission (SERC) to continue its operations under the AOMT model.

To ensure transparency and credibility in the process, the concept note specifies the appointment of several external professionals. A technical consultant will be engaged to perform technical due diligence of the assets, ensuring they are in suitable condition for transfer. In parallel, an independent valuer will be responsible for conducting a financial valuation to determine the fair value of the assets. The role of Bid Process Coordinators is also crucial, as they will oversee the competitive bidding process through which private participants can acquire the operational rights for the assets.

The document highlights the importance of detailed legal documentation to support the monetization process. Key agreements include the transfer agreement between the seller and buyer, the transmission service agreement, and the definition of the tenure for which the assets will remain under private operation. The note places strong emphasis on tariff certainty for the monetized assets, as this directly influences their financial valuation and determines the success of the bidding process. A clear and stable tariff structure is seen as essential for attracting investor confidence and ensuring financial viability for both public and private stakeholders.

A large part of the concept note also focuses on understanding and managing the tax implications associated with this process. Stamp duty has been identified as one of the most complex aspects. The transfer of immovable property attracts a stamp duty rate of five percent, while movable property transferred through a delivery note may attract only a nominal rate. Additionally, when the immovable property is located outside Tamil Nadu, an extra five percent stamp duty will apply. For corporate transactions, specific stamp duty rates have been prescribed: 0.005 percent on the issuance of shares and 0.015 percent on the transfer of shares.

The note recognizes that absolute clarity on these tax-related issues is vital for the success of the AOMT model. It suggests that all stamp duty implications, including possible exemptions under Section 8G of the Indian Stamp Act 1899 (added by the Finance Act 2021), need to be thoroughly examined. As stamp duty rates and exemptions can vary across states, specialized Stamp Duty Experts will be required to review the financial structure to ensure complete revenue certainty and accurate accounting of tax liabilities.

Overall, the CEA’s concept note lays the foundation for a detailed and transparent process that could potentially transform the management and monetization of India’s public transmission assets. By combining technical diligence, financial valuation, and clear regulatory guidelines, the AOMT model aims to promote private participation, improve operational efficiency, and create a predictable revenue framework for India’s power transmission infrastructure.