At 20%, CPSEs’ capex pace creditable, yet below target

Continued momentum in capital expenditure by the Centre, CPSEs and states is necessary to push GFCF, as low capacity utilisation and continued uncertainties over the pandemic are deterring private investors from taking the plunge.

Capex by these state-run entities, each with annual investment budget of over Rs 500 crore, was 52% of their aggregate capital expenditure target of Rs 5.96 lakh crore for FY22 in April-November period.
Capex by these state-run entities, each with annual investment budget of over Rs 500 crore, was 52% of their aggregate capital expenditure target of Rs 5.96 lakh crore for FY22 in April-November period.

Capital expenditure by large central public-sector entities — companies and undertakings — rose by 19% on year to Rs 3.1 lakh crore in the first eight months of the current financial year, official sources told FE.

Capex by these state-run entities, each with annual investment budget of over Rs 500 crore, was 52% of their aggregate capital expenditure target of Rs 5.96 lakh crore for FY22 in April-November period. While these 40-odd large CPSEs and departmental undertakings are sure to miss the finance ministry’s directive of achieving 90% of their target by December, they have to accelerate their capex in the remaining four months of FY22 to achieve the 30% annual growth target.

Investment expenditure as measured by gross fixed capital formation (GFCF) grew by 11% in Q2FY22 over its level in Q2FY21 and by 1.5% when compared to its level in 2QFY20. Continued momentum in capital expenditure by the Centre, CPSEs and states is necessary to push GFCF, as low capacity utilisation and continued uncertainties over the pandemic are deterring private investors from taking the plunge.

In April-November of FY22, the railways was the largest investor by deploying capex of about Rs 93,000 crore or 48% of its annual target of Rs 1.95 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.

The National Highways Authority of India (NHAI) was the second largest investor among state-run agencies with capex of Rs 87,000 crore or 71% of the full-year target of Rs 1.22 lakh crore. NHAI is currently developing several expressways including Delhi-Mumbai, Delhi-Katra, Bengaluru-Chennai and Delhi-Dehradun.

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 about Rs 16,000 crore or 67% of its annual capex target in April-November 2021.

Fuel retailer-cum-refiner Indian Oil Corporation invested about Rs 16,000 crore (56% 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.

During the period, upstream oil CPSE, ONGC reported capex of about Rs 14,500 crore or about 49% 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.

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.

Improved revenues have helped the states to maintain a robust capital expenditure pace in the first seven months of the current financial year. Data gathered by FE of 16 states showed that these states reported a combined capex of Rs 1.5 lakh crore in April-October of FY22, up 70% on year, compared with a decline of 34% in the corresponding period of FY21. The Centre’s capex in April-October of FY22 stood at Rs 2.53 lakh crore, an annual increase of 28%.

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