Vicious cycle: CPSEs owe a lot, but deprived of much larger dues

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September 21, 2020 8:00 AM

So, if the CPSEs, on their part, have not cleared a large portion of their dues to the industry (public and private), and the outstanding amount touched Rs 60,500 crore at March end, 2020, it is due to this vicious cycle of defaults.

And they continued to give the much-needed fillip to a faltering economy through sustained rise in capital expenditure.

Trade receivables of 14 among the larger central public sector enterprises (CPSEs) rose 42% year-on-year to Rs 3.5 lakh crore at FY20 end, according to data reviewed by FE. This is partly, if not largely, due to payments held up by their owner, namely the central government, against the supplies received of goods and services. So, if the CPSEs, on their part, have not cleared a large portion of their dues to the industry (public and private), and the outstanding amount touched Rs 60,500 crore at March end, 2020, it is due to this vicious cycle of defaults.

In fact, as the chart shows, the trade receivables of CPSEs – 249 in total – have been rising relentlessly in recent years. The consolidated figures are available for only up to FY19; but given the big rise in receivables of the 14 large firms, the figure must have shot up further in FY20.

In fact, dues to CPSEs rose much faster than the amount they owe to the industry. If trade payables of all CPSEs grew 1.5 times from Rs 1.5 lakh crore at FY11 end to Rs 2.2 lakh crore at FY19 end, the dues to CPSEs surged 3.8 times to Rs 4.95 lakh crore during the same period.

Despite the piling up of receivables, many of the larger CPSEs have managed to contain rise in payables largely by resorting to debt financing – their long-term borrowings rose 206% to Rs 13.63 lakh crore during FY11-FY19. And they continued to give the much-needed fillip to a faltering economy through sustained rise in capital expenditure.

A large part of the surge in CPSEs’ receivable is attributable to postponement of release of subsidy dues to Food Corporation of India, which carries out procurement and storage of food grains for implementation of the National Food Security Act.

CPSEs with large trade receivables at FY20 end are – NTPC (Rs 15,668 crore), Coal India (Rs 14 ,408 crore), BHEL (Rs 12,378 crore), Hindustan Aeronautics (Rs 11,583 crore ), SAIL (Rs 8,812 crore), BEL (Rs 6,740 crore), NLC (Rs 6,692 crore) and Nuclear Power Corp (Rs 4,115 crore). While receivables of some of these CPSEs are mostly from the Centre, in some others, most pending dues are from other CPSEs or state government undertakings. “..around 99% of trade receivables is with respect to the government and government-related entities,” according to HAL’s FY20 annual report. “Around 99% of trade receivables (are) with respect to the government and government-related entities,” BEL says in its FY20 annual report.

Similarly, about 81% of total receivables of BHEL pertains to the government sector. For Coal India, around 55% of dues are from state power generating companies/electricity boards, the balance are from CPSEs (according to a CIL analysis of pending dues as on November 30, 2019). Even though an email to the company elicited no response, an analysis of its annual report shows that the company primarily sells electricity to bulk customers comprising mainly state government utilities.

CPSEs with high ‘trade payables’ include Coal India (Rs 10,108 crore), BHEL (Rs 9,900 crore), NTPC (Rs 9,001 crore), BEL (Rs 2,425 crore) and NBCC (Rs 2,151 crore) as on March 31, 2020. Most of these are dues for goods and services procured from industry (both public sector and private sector). Among others, Engineers India, NHPC, Mishra Dhatu and PowerGrid also have huge receivables and unpaid dues to industry.

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