Several cash-rich public sector companies are working on huge capital expenditure plans, courtesy a nudge from the prime minister in October, but most plans remain on paper due to delays in green clearances and land acquisition.
According to the latest data, 45 listed central public sector undertakings (PSUs) are sitting on a cash and bank balance of Rs 196,000 crore. A bulk of this cash pile, around 70 per cent, is with the top five — Coal India Ltd (CIL), ONGC, NMDC, NTPC and Oil India.
CIL alone had a cash balance of Rs 61,000 crore at the end of the second quarter ended September. The company has formulated a strategy to invest Rs 25,400 crore over the entire 12th Plan period, including Rs 4,300 crore to be invested this year. “But environment and forest clearances will have to come fast for the plan to materialise,” says a senior CIL executive.
Currently, 178 project proposals by CIL are awaiting forest clearances and another 123 environment clearances. Even the company’s underground mining projects have started facing land acquisition problems as settlements have come up over land areas owing to delays.
Another cash-rich PSU, NMDC Ltd, is battling a delay in getting new mining leases from the government. Cash reserve of the company swelled from Rs 22,000 crore at the end of March to Rs 24,000 crore now. Thanks to the investment push, India’s largest iron ore miner has already submitted a detailed Rs 30,000 crore capital expenditure plan to the government. This includes investing Rs 4,600 crore this year.
According to a senior NMDC executive, of the current year’s target, Rs 1,200 crore is being used to make international acquisitions. The balance, Rs 3,400 crore, would be invested in domestic mining and infrastructure projects.
In the power sector, investments have been languishing because of coal supply crunch and the ill financial health of distribution companies apart from green clearances, taking a toll on the performance of large investors both in the public and the private sectors. This is evident in the power index of the Bombay Stock Exchange (BSE), which has dropped nine per cent from 2130.5 on April 2 to 1937.8 last Tuesday.
Power generator NTPC, which had a cash and bank balance of over Rs 18,000 crore in March 2012, has already cut down its investment size for the current Plan period by around a fourth, or Rs 45,000 crore, owing to the uncertainty surrounding coal availability. The company had originally planned to invest Rs 2 lakh crore through 2017.
A senior NTPC executive says new project proposals of around 11,000 Mw are stuck for want of coal. With a current power capacity of 36,000 Mw, NTPC alone accounts for 92 per cent of India’s coal-based capacity in the central sector.
Power equipment manufacturer Bharat Heavy Electricals Ltd (BHEL) — which had taken most of the blame for delays in capacity additions during the Tenth Plan — has cash reserves of Rs 6,700 crore, but has been battling a historic slump in fresh orders due to financing constraints. “I am not seeing any tender from the private sector. There has hardly been any bulk deal coming this year,” says BHEL Chairman B P Rao. Equipment tenders of more than 40,000 Mw were floated every year between 2008 and 2010. The tender capacity came tumbling down to 4,000 Mw last fiscal.
Investment in power and mining sectors may be largely PSU driven, but to a large extent, its success rate depends on transport logistics. The CIL executive says the government should put pressure on the Railways to set up evacuation infrastructure, if investment climate has to really improve.
In the port sector, things have started looking up after the Union Cabinet, in September, approved the proposal of delegation of enhanced financial powers to the shipping ministry to award port projects that cost less than Rs 500 crore. “The Cabinet decision has removed a major roadblock and has proven helpful in speeding up the process for awarding projects,” says P K Sinha, shipping secretary.
For 2012-13, the shipping ministry aims to award 42 projects, of which 29 are through the public-private partnership route. The target given by the prime minister to the shipping ministry for 2012-13 involves a total investment of Rs 35,000 crore and a capacity addition of 244 million tonnes. Till October 2012, the ministry has awarded nine projects, of which four involve Rs 1,886 crore of private investment. Another four projects would be awarded by the end of December 2012.
After a long period of inactivity running into months, the government is now set to award 30 fresh contracts for construction of 4,000 kilometre of roads in expansion projects. Around 40 companies are likely to participate in the bidding for contracts worth Rs 14,000 crore.
The NHAI and road transport ministry are currently looking at the requests for qualifications received so far, said a senior ministry official. The government will hold another round of review meeting in January with chairmen of cash-rich PSUs.