Budget 2019: Central government companies have emerged as the main driver of economic activity in the country, creating infrastructure and generating employment. In the last three years they have regularly outpaced central government's capital expenditure by a good margin.
In last three years, central government PSUs have spent more money as capital expenditure than that is spent by the central government through budget. Budget 2019: Government-owned companies have consistently outpaced the Union government in capital expenditure, becoming a major driving force for the economy. In the last three years, capital expenditure by central public sector undertakings was 40-60% higher compared with the amount spent by the government.
CPSUs have spent nearly Rs 13 lakh crore between 2015-16 and 2018-19, compared with the government’s capital expenditure of Rs 8.58 lakh crore for the period. In the last three years, the budget has expanded significantly in terms of total budgeted expenditure of the government as it has gone up by a fourth during this period from Rs 20 lakh crore to almost Rs 25 lakh crore. Despite a massive budget of nearly Rs 25 lakh crore, NDA government is being criticised for spending too much money on revenue expenditure that leaves little money for creation of capital assets as it assigned only Rs 3 lakh crore or 12% for capital expenditure for the current fiscal.
Any increase in capital expenditure by the government is considered good for economy as this amount goes into creation of assets rather than meeting the government’s own expenditure, subsidy burden and interest payments which is considered non-productive or bad for economic growth.However, the government also spends a considerable amount for capital creation outside the budget. This money is spent in form of internal and extra budgetary resources.
In 2016-17, government mobilised Rs 3.38 lakh crore for capital expenditure through public sector enterprises, which was 27% more than the capital expenditure of Rs. 2.66 lakh crore which was routed through budget. The trend of public sector companies spending more money on account of capital expenditure than the total money spent by the central government through budget route was further strengthened in the next year as well. According to the revised estimates for FY 2017-18, the government spent just Rs 2.66 lakh crore on account of capital expenditure which was almost at the same level for previous year.
However, during the same year, capital expenditure by central PSUs witnessed a quantum jump of 40% as they spent Rs. 4.76 lakh crore on account of capital expenditure, basically on creating new capacity. In fact, the capital expenditure by central government companies was 80% more than the total budgeted capital expenditure of the central government in FY 2017-18, which was pegged at just Rs. 2.73 lakh crore as per the revised estimates as against Rs 4.76 lakh crore spent by CPSEs.
More than 250 central government companies including big companies like ONGC, IndianOil, NTPC, NHPC, BHEL, GAIL and others have spent Rs 8.15 lakh crore in capital expenditure in previous two fiscals as against Rs 5.58 lakh crore spent by central government, which is 46% more than the money spent by central government during the same period.
This trend of public sector companies actually driving the creation of capital assets in the country is expected to continue for this fiscal as well. Former Finance Minister Arun Jaitley has allocated Rs 3 lakh crore for capital expenditure as against Rs 4.78 lakh crore that is expected to be spent by CPSEs in capital sector spending, which is almost 60% more than the central government’s capital expenditure.