The England and Wales Cricket Board announced on Tuesday that Pietersen would not be selected for the upcoming tour of the Caribbean or ICC World Twenty20, with the batsman confirming he would not be playing for his adopted country again.
It is now thought by many that Pietersen, whose previous participation in the lucrative IPL has been limited due to his England commitments, will become a gun for hire in the shortest form of the game, and Modi reckons he will be a big attraction.
He told BBC Radio Five: "I think, as far as the franchises are concerned, this is like a God-sent gift.
"Kevin Pietersen is one of the world's best players, without any doubt, as far as Twenty20 is concerned, and other forms of the game.
"Every (IPL) team owner's dream was to get Kevin Pietersen to be playing full-time, to be available for the whole season, but he had to make time for the national team, rightly so.
"But now that he will be available for the whole time I think it will be England's loss and the IPL's gain and I myself am extremely happy that he will be available.
"I wouldn't be surprised if he went upwards of £2.5 to 3million."
Pietersen has represented Royal Challengers Bangalore, Deccan Chargers and Delhi Daredevils so far in the IPL but will go into the auction on February 12-13 as a free agent after Delhi opted not to retain any of their squad.
The 33-year-old has been listed at the highest base price of £194,000, with Kings XI Punjab already publicly salivating over the prospect of signing him for the entire seven and a half weeks.
It has often been suggested that Pietersen's desire to play in the tournament has undermined his commitment to England, but former fast bowler Steve Harmison has dismissed such thoughts.
"The thing that makes me laugh, what people perceive Kevin to be, is this money-man, this selfishness and all that that goes with Kevin," he said.
"Yes, he does have an eye on some of these things, but if you think how long the IPL has run its course so far - Kevin Pietersen hasn't played a great deal and - even though he might be thinking it inwards - he hasn't put his IPL commitments before he has put his Test match commitments.
"He's always come back and played for England.
"He's missed a hell of a lot of IPL cricket so far. For me, that is somebody who wants to play cricket for England.
"We are going to see Kevin Pietersen probably make more money now than he's ever made in the last two or three years because of what he can get out of the IPL.
"The sad case of affairs is, I think he would give that all up to play for England for another two or three years."