Asset Creation: Central PSEs achieve 16% of annual capex target in Q1

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July 19, 2021 5:15 AM

Public sector capex — by union government, state governments and state-run entities — plays an important role in gross fixed capital formation in the country to support economic growth.

With the Union government’s thrust on investment-led economic growth revival, the finance ministry has recently asked the central public sector enterprises (CPSEs) and other agencies to accelerate the pace to achieve the FY22 capex target by the third quarter itself.With the Union government’s thrust on investment-led economic growth revival, the finance ministry has recently asked the central public sector enterprises (CPSEs) and other agencies to accelerate the pace to achieve the FY22 capex target by the third quarter itself.

Large central public-sector entities — companies and undertakings — achieved 16% of their aggregate capital expenditure target for FY22 in the first three months of the current financial year, by spending Rs 93,000 crore, according to official sources.

Given the second Covid wave that disrupted an incipient economic revival, this is a decent number; these entities achieved just about 7% of the annual capex target in the year-ago period when nation-wide lock-down brought economic activities to a standstill.

With the Union government’s thrust on investment-led economic growth revival, the finance ministry has recently asked the central public sector enterprises (CPSEs) and other agencies to accelerate the pace to achieve the FY22 capex target by the third quarter itself.

The combined capital expenditures by 40-odd large CPSEs and departmental undertakings — all with annual capex budgets of above Rs 500 crore — are projected to be Rs 6 lakh crore in FY22, an increase of 30% on year.

In April-June of the current financial year, the National Highways Authority of India (NHAI) has emerged as the highest investor with Rs 30,000 crore or 25% of the full year target of Rs 1.22 lakh crore. In fact by building national highways at a record 37km/day, NHAI has overtaken Indian railways for the first time in FY21 by investing Rs 1.25 lakh crore. NHAI is currently developing several expressways including Delhi-Mumbai, Delhi-Katra, Bengaluru-Chennai and Delhi-Dehradun.

In Q1FY22, the railways was the second largest investor by deploying capex of about Rs 28,000 crore or 13% of its annual target of Rs 2.15 lakh crore. Railways’ investment is largely in the laying of new lines, doubling of tracks, augmenting traffic facilities and construction of rail over bridges/road under bridges.

During the period, upstream oil CPSE, ONGC reported capex of about Rs 5,000 crore or about 17% of its FY22 capex target of Rs 29,800 crore. The oil explorer’s capex deployment was mainly in KG 98/2 Cluster II, Mumbai High South Redevelopment Phase IV, Life Extension of well platforms and Heera Redevelopment Phase-III Project.

Fuel retailer-cum-refiner Indian Oil Corporation invested Rs 4,700 crore (16% of full-year target). It is expanding the capacity of Barauni refinery from 6 million tonne per annum (MTPA) to 9 MTPA, Panipat refinery from 15 MTPA to 25 MTPA and Gujarat refinery from 13.7 MTPA to 18 MTPA.

Power producer NTPC — which is building 1,980 MW thermal plant in North Karanpura, 1,600 MW Telangana power project, 300 MW Nokhra solar power plant and 300 MW Shimbhoo Ka Burj solar project — invested Rs 4,500 crore or 19% of its annual capex target in April-June 2021.

Coal India invested about 12% of its FY22 capex target of Rs 14,700 crore in the first three months of the current financial year in first-mile connectivity projects, land acquisition, replacing ageing equipment with new modernised machines, evacuation measures, etc.

Dedicated Freight Corridor Corporation, which is targeting to complete western and eastern dedicated freight corridors by June 2022, has invested about 10% of its FY22 annual capex target of Rs 20,000 crore in April-June.

In the last few years, capex by CPSEs and other agencies has remained robust. Capex by these entities was Rs 4.6 lakh crore or 92% of the annual target for FY21; this was 4.3% higher than the capital spending by these entities in FY20.

Public sector capex — by union government, state governments and state-run entities — plays an important role in gross fixed capital formation in the country to support economic growth.

Aided by recovery in tax revenues, state governments also seem to have stepped up capital expenditure, reversing a declining trend witnessed in FY21 due to the pandemic, which dented revenues and necessitated elevated revenue spending. Data gathered by FE of 15 major states shows that these states reported combined capex of Rs 26,115 crore in April-May of the current financial year, up 129% on year. Of course, the surge is aided by a low base. During April-May of FY22, the union government’s capital expenditure grew 14% on year to Rs 62,961 crore.

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