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Amid sluggish economic growth, Prime Minister Manmohan Singh today sent out a clear message to central public sector enterprises (CPSEs) to invest their estimated cash reserves of Rs 2.5 lakh crore to boost capital formation in the country. If CPSEs failed in this, they should pay higher dividends to the government, he added.
"The prime minister asked the CPSEs to use the surplus for their own benefit and the benefit of the economy. They should use it for driving investment, growth and jobs," read a statement by the Prime Minister's Office (PMO). It added investing such surplus cash would help reignite growth impulses in the economy.
The meeting, chaired by the prime minister, was attended by Finance Minister P Chidambaram, Planning Commission Deputy Chairman Montek Singh Ahluwalia, Heavy Industries and Public Enterprises Minister Praful Patel and the chairmen and managing directors (CMDs) of 25 CPSEs.
Officials said PSUs were asked to finalise their capital expansion plans by January 2013.
At the meeting, CMDs of cash-rich CPSEs raised concern over autonomy and regulatory issues. The prime minister assured them of setting up a committee of secretaries headed by Cabinet Secretary Ajit Kumar Seth to look into the issues, according to people in the know.
After the meeting, Patel told reporters, "While the government would like them (CPSEs) to grow and invest in their development plans, if PSUs (public sector undertakings) do not deploy investible surpluses in their own growth and expansion, that money should not lie idle. It must be paid back to the government by way of special dividend." He said PSUs had about Rs 2.50 lakh crore of investible surpluses.
Patel said there was no specific discussion on disinvestment of government stake in CPSEs, adding all efforts would be made to meet the disinvestment target of Rs 30,000 crore for this financial year.
On growth, Singh said, "We cannot be satisfied with the status quo. Our growth should be maintained at 8-8.5 per cent, regardless of what happens in the world economy. We must learn to swim, and swim fast enough, whatever be the circumstances." Various hurdles in the Indian economy, particularly those relating to exports, could be attributed to the slackening demand in the Euro zone and the US. However, the prime minister said, "Even if international demand is not there, domestic demand should drive the investment and our endeavours."
A major concern is in 2011-12, the investment rate stood at 34.7 per cent of gross domestic product (GDP) ---the same as in 2010-11. This financial year, it is projected to grow to 35.3 per cent. However, this would be less than the 38.1 per cent recorded in 2007-08.
Gross fixed capital formation in the quarter ended June grew just 0.65 per cent, against 3.6 per cent in the previous quarter and 14.6 per cent in the first quarter of 2011-12.
"The prime minister noted the investment rate in the country had declined due to the recent slowdown. To achieve eight per cent growth, this should be increased to 36-37 per cent," the PMO statement said.
He added CPSEs contributed about six per cent to India's GDP and their aggregate profits stood at a record level of about Rs 1,00,000 crore.
Dividend by CPSEs this financial year is pegged at Rs 27,178 crore. Higher dividend by CPSEs might also help narrow the country's fiscal deficit.
At the meeting today, CPSEs demanded complete autonomy for their boards in day-to-day management, investment planning, mergers and acquisitions, creation of posts below board levels and empowerment to CMDs to travel in case of business requirements. The PSU chiefs also urged the prime minister to ensure CPSEs were treated "as commercial entities, not as government departments". They told the prime minister CPSE executives, especially chairmen and board members, should be differentiated from 'bureaucrats' to enable them to perform like their counterparts in private sector enterprises.
U D Choubey, director general of the Standing Conference of Public Enterprises, the apex body of CPSEs, said the public sector units alleged multilateral checks and balances were coming in the way of decision-making and, in turn, leading to sub-optimal performance.
The issue of succession and a faster process to select CMDs and directors was also discussed. The prime minister asked Patel to work with the finance ministry, the Planning Commission and the National Manufacturing Competitiveness Council to address these issues.
A chairman of a large CPSE said sectoral issues were also discussed in the meeting.