Amid constant prodding by the finance ministry, large central public-sector entities — companies and undertakings — have improved their capital expenditure (capex) in the first four months of the fiscal in a bid to help spur economic growth.
These entities realised 28% of their annual capex target until July this fiscal by spending Rs 1.85 trillion, according to official sources. In the same period last fiscal, they had achieved about 23% of their annual target.
Public capex remains critical to the country’s post-Covid economic resurgence, as private investments have remained elusive or are limited to a few sectors. The improved performance of CPSEs and central government departments will somewhat offset the tepid capex by state governments, some of whom have been strapped for finances in the wake of the Covid outbreak.
The Centre’s own budgetary capex jumped 57% on year in the first quarter of FY23 to Rs 1.85 trillion, as it sought to front-load productive spending, betting big on its high multiplier effect.
However, the combined capex of twenty states, representing roughly 80% of the country’s gross domestic product (GDP), dropped 9% on year to Rs 55,057 crore in the June quarter, according to an FE analysis.
At Rs 6.62 trillion, the FY23 capex target for large CPSEs forms a sizable chunk of the overall public capex goal. The capex target of the central government stood at Rs 7.5 trillion (including Rs 1 trillion in the form of long-term loans to states for asset creation) for FY23.
Railways and the National Highways Authority of India (NHAI), the two largest public-sector investors, continued their capex momentum with nearly 50% growth between April and July, reflecting the Centre’s strategy for an investment-led economic growth revival.
The capex target for the 59 entities — 54 CPSEs and 5 departmental arms — with an annual capex of at least Rs 100 crore is set at Rs 6.62 trillion for FY23.
In April-July of the current financial year, Railways was the largest investor among public-sector entities. It spent Rs 59,831 crore, or 26% of its annual target of Rs 2.29 trillion, compared with Rs 40,000 crore, or 19% of the annual target of `2.15 trillion, a year earlier. The railways’ investment is largely in the laying of new lines, doubling of tracks, augmenting traffic facilities, procurement of wagons and trains.
Next comes the NHAI. It spent Rs 59,728 crore in the April-July period, having achieved 45% of the full-year target of Rs 1.34 trillion, compared with `41,000 crore or 34% of the annual target a year before. As such, the government is on a highways construction spree to bring down the travel time between key cities across the country.
Fuel retailer-cum-refiner Indian Oil Corporation, which is expanding capacity in several of its refining plants, invested Rs 9,713 crore or 34% of its annual target of Rs 28,549 crore in April-July period. This is higher than what it had achieved a year before — 24% of the annual target.
ONGC, the top CPSE player in oil and gas exploration sector, has incurred a capex of Rs 8,200 crore in the first four months of the current financial year, or 28% of the annual target. NTPC invested Rs 7,300 crore in April-July 2022, or 32.5% of its FY23 target. Similarly, Coal India’s capex stood at Rs 4,330 crore during this period, or 26% of its FY23 target.
Driven by higher capex by the Centre, states and state-run entities, the investment rate (gross fixed capital formation/GDP) in Q4FY22 was estimated at 33.6%, the highest in nine quarters.
A sustained capex push by the government also comes at a time when the economy faces fresh external headwinds and interest rates are being hiked across economies to tame inflation.