NMCC suggests diverting Surplus PSU funds for Infra development

In a bid to boost infrastructure development in the country, the central government is considering a plan to utilize surplus funds generated by state-run firms. A suggestion has been put forward by the National Manufacturing Competitiveness Council (NMCC) to park funds thus generated in the National Investment Fund (NIF), to be used for infrastructure development purposes. It was also suggested that money accumulated in the NIF should be employed in the development of critical sectors like nuclear power, aviation and railways. In order to give a final shape to the proposal put forward by the NMCC, further discussions will have to be held with different Public Sector Units (PSUs) and associated administrative ministries.

Surplus cash with 23 PSUs:

As revealed by the Prime Minister’s Office (PMO), as many as 23 state-run firms had achieved 94% of their capital expenditure target, for the first quarter of the fiscal 2013-14. The capital expenditure of these companies are under constant review by the PMO so as to gauge their long-term investment pattern. It has been estimated that these state-run companies have more than 3 lakh crore of surplus cash. With the intention of tapping into this bounty, the government is in favour of involving these PSUs to invest in various infrastructure projects, aimed at expansion. These 23 PSUs have been set a total capital expenditure target of Rs. 1.41 lakh crore for this fiscal.

PSUs under consideration:

The NMCC has put forward the names of many such PSUs that include Steel Authority of India, many developing fertilizer plants, a coal-based power company being set up by a hydro power company, as well as NMDC Ltd, which is working on a steel plant. With the objective of achieving their capital expenditure targets many PSUs are showing the gumption to venture into areas which are totally unrelated to even their ancillary areas of operation.

Monitoring capital expenditure of PSUs:

To facilitate greater accountability on the part of the state-run companies, the capital expenditure plans of these companies are constantly monitored by officials in the PMO. Besides, it has also entrusted administrative ministries to seek quarterly reports  on the actual deliverables made by these companies. On their part, the PSUs opined that diversification into other business operations would function as a hedge to safeguard themselves against business risks. Moreover, they would also facilitate as a suitable growth avenue for these companies.

Diversification to safeguard interests of PSUs:

The Prime Minister’s Office is monitoring the capital expenditure plans of state-run companies, while directing administrative ministries to seek quarterly reports on the actual deliverable of these companies. These companies are of the opinion that diversifying operations acts as a hedge against business risk and provides an avenue for growth as well.