Battling slowdown, FM Sitharaman asks 7 CPSEs to achieve 50% of capex target by end-September

By: |
July 24, 2020 5:30 AM

With a nearly 40% share, CPSEs have in recent years been the main pillar of public capex and have largely kept pace, even as the other two segments — central budget (25%) and states (35%) faltered.

Sitharaman had reviewed the capex performance of 23 CPSEs in Q1FY21.

Worried over slowdown in capex by the central public sector enterprises (CPSEs), finance minister Nirmala Sitharaman on Thursday asked select seven CPSEs to accelerate spending to achieve 50% of their FY21 capex target by the end of September quarter (Q2). These PSUs had achieved only 14% of annual capex target in Q1.

In a video conference with the second batch of CMDs of the CPSEs, Sitharaman asked the secretaries of administrative ministries concerned and the chairman railway board to closely monitor the performance of CPSEs in order to ensure expenditure of 50% of capital outlay by the end-Q2 of FY21 and make appropriate plan for it, finance ministry said in a statement.

Given that these seven CPSEs belonging to civil aviation, steel and railways have achieved only 14% in Q1FY21, achieving 50% will be a tough task given Covid-19 pandemic and back-loading of capex expenditure (usually 75% capex is incurred in H2 of a year).

These seven CPSEs achieved Rs 3,557 crore (14% of FY21 target) compared with Rs 3,878 crore (13%) in the year ago quarter. The combined capex target for FY21 for these seven CPSEs is Rs 24,663 crore. In FY20, these CPSEs achieved 85% of their capex target of Rs 30,420 crore. Sitharaman said that unresolved issues should be flagged immediately to the departments of economic affairs, public enterprises, and investment and public asset management for immediate action on them, the ministry said.  FM will now hold such review meetings on the performance of capex of CPSEs every month, scoring the urgency to revive economic activity.

On their part, the CPSEs flagged constraints being faced by them especially due to covid-19 pandemic. On July 7, Sitharaman had reviewed the capex performance of 23 CPSEs in Q1FY21. According to sources, the government is worried over capital expenditure performance by CPSEs and other state-run entities like NHAI and railways, which have nearly halved from the trend level in the April-June quarter.

Though this may still be better than the performance of private sector entities during the period, the development could have a serious debilitating effect on the economy, as the bureaucracy-ridden state-run firms would take longer than others to re-deploy capex once it is slowed down.

With a nearly 40% share, CPSEs have in recent years been the main pillar of public capex and have largely kept pace, even as the other two segments — central budget (25%) and states (35%) faltered. According to official sources, all 250 CPSEs among themselves spent just 7% of their annual target in Q1FY21, compared with the trend of spending 15% of annual target or thereabouts in the first quarter.

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