Firms with capex budget of `500 cr+ achieve 60% of annual target in nine months; Q4 seen stronger
The Centre-owned companies and other undertakings have sustained last year’s brisk pace in capital expenditure in the first nine months of the current fiscal, continuing with their enhanced contribution to fixed assets creation in the economy amid lackadaisical private investments. The central public sector enterprises (CPSEs) and departmental undertakings (DUs) with annual capex plans of Rs 500 crore and above have invested Rs 1.93 lakh crore in April-December this year, 60% of the annual target for these firms. About 40% of the capital spending by these entities usually take place in the last quarter of the year. Including other (smaller) firms, the Centre’s PSU capex target for the current year could be revised from the budgeted Rs 3.85 lakh crore to Rs 4.1 lakh crore, official sources said. On the budgetary capex side, where the 2017-18 target is Rs 3.1 lakh crore compared with Rs 2.9 lakh crore achieved last year, there could be a moderate slippage, given the fiscal constraints. This is despite the fact that riding on defence and road projects, the budgetary capex rose 29% to Rs 1.84 lakh crore in April-November this year compared to Rs 1.43 lakh crore a year ago.
Gross fixed capital formation is expected to grow 4.5% this fiscal, compared with 2.4% last year, according to the Central Statistics Office (CSO) forecast, indicating that the spending by the Centre via Budget and its firms has helped arrest the decline in gross fixed capital formation (GFCF).
Nevertheless, the data from the specified CPSEs and DUs signal that public spending, which was a key growth driver in 2016-17, retained that role into the current fiscal as well. In 2016-17, investments by the large entities with capex above Rs 500 crore, from own resources and borrowings, were Rs 2.54 lakh crore. Their capex target for the current year is set at a comparatively lower Rs 2.4 lakh crore, but sources said, the investments in the full year could be higher than the target. The government has nudged these firms to spend more.
In addition, these entities will get about Rs 69,120 crore this year as a budgetary capex support. Among the government entities, the National Highways Authority of India (NHAI) was the largest investor in April-December of FY18, followed by Oil and Natural Gas Corporation and NTPC (see chart). NHAI, which aims to construct 3,500 km of highways this year, invested about Rs 57,392 crore, which is about 17% of the total investments made by these entities in the first nine months of FY18. ONGC has already invested Rs 26,498 crore, or 88% of its FY18 target, mostly to develop offshore oil and gas fields. NTPC, which has about 24 GW of capacity under construction, invested Rs 18,597 crore, or 66% of its annual target during the period. Of the 39 government undertakings which reported capex of Rs 500 crore and above, four including, Steel Authority of India, achieved (`3,724 crore or 106%) more than 75% of their annual investment targets in the first nine months of this year.