Finmin asks PSUs to step up capex

Govt Wants State-Run Cos To Deploy Idle Cash, Boost Investment Sentiment

New Delhi: With little revival in private investment, the finance ministry is getting over half-a-dozen PSUs to speed up construction of projects, add capacity and increase investment level in the economy. Cash-rich companies such as Coal India, ONGC, SAIL, National Mineral Development Corporation, Hindustan Aeronautics, among others, are being pushed for higher capital expenditure. 
    Just these five companies between them were sitting on a cash pile of nearly Rs 1.35 lakh crore, while there are at least another two — NTPC (over Rs 16,000 crore) and Oil India (nearly Rs 11,000 crore) — that had bank balances of over Rs 10,000 crore each at the end of March 2012. Bharat Heavy Electricals (Bhel), which was in the same league, saw its cash balance dwindle from nearly Rs 10,000 crore to around Rs 6,400 crore at the end of March 2012. 
    Finance minister P Chidambaram is expected to meet top officials of these companies next week to push for stepping up investment to revive sentiment and demand. Eight state-owned companies have nearly Rs 1.7 lakh crore cash and bank balance with them, although it could not be confirmed if NTPC, OIL and Bhel have been called for the meeting. 
    As reported by TOI on January 11, the PMO had asked 17 PSUs with a combined cash balance of over Rs 1.6 lakh crore to step up capex beyond their target of Rs 1.76 lakh crore for 2012-13. The list, however, included oil marketing companies such as IndianOil, which are now deep in the red as the government is refusing to compensate them for selling petroleum products below the market price. 
    The view in the government is that these companies are not using the resources available with them, especially at a time when the private sector has held back investment due to high interest rates, uncertain economic environment and a series of policy flip-flops. 
    As a result, gross fixed capital formation, used to measure investment in the economy, fell to 32.8% of GDP during the first quarter of the current financial year, compared to nearly 34% a year ago. 
    For instance, Coal India had originally lined up investment of a little over Rs 4,000 crore for the current financial year, which is less than one-fourteenth of its bank balance. Similarly, NMDC, which is sitting on over Rs 20,000 crore, has lined up capex of Rs 4,600 crore in the current financial year, and around Rs 30,000 crore for the 12th plan period (2012-17). 
    Unlike private companies, these companies have a low debt-equity ratio, indicating that they are not leveraging the resources available with them. In certain cases such as SAIL, the company chose to repay loans resulting in its cash and bank balances falling by over Rs 11,000 crore to around Rs 6,400 crore at the end of March.