FM to review capex plans of public sector units

Govt nudges private firms for more investments to stimulate economic growth; wants CCI meet twice a month

In a bid to increase investment flow to the infrastructure sector, the government may soon review the timelines given to public sector undertakings (PSUs) for investing surplus cash. The capital expenditure plans of PSUs for the coming financial year are also likely to be reviewed.

To discuss these and also to prod the private sector to invest more, Finance Minister P Chidambaram is likely to hold a meeting during the recess of Parliament’s Budget session between March 22 and April 22.

Besides, the government is targeting to hold meetings of the Cabinet Committee on Investment (CCI) twice a month. The CCI is likely to clear projects facing problems in the power, roads and highways sectors in its next meeting.

The government had asked cash-rich state-run companies to invest their idle funds by March to spur manufacturing or be prepared to give a higher dividend. In the light of slow economic growth, the finance ministry now also wants the private sector to invest their surplus cash. Chidambaram will hold meetings with private sector companies on their capital expenditure plans.

“Private sector investment may be held up because of land and environmental issues. Operationally, things can be done to make way for investment. The CCI has not entered into private sector manufacturing,” said an official who did not wish to be identified.

The first meeting of CCI was on the oil and gas sector in January. It had directed the defence and petroleum ministries to sort out the differences on stuck up projects. The second meeting was on coal projects, held in February. The third meeting, held yesterday, carried forward the task deliberated at the first meeting. It gave clearance to Reliance Industries Ltd’s KG-D6 block and the gas discovery area, NEC-26 along with most areas where the company had been either barred any oil and gas activity or faced stringent conditions. However, it refused to give clearance to three energy blocks of ONGC and BG Group in the Krishna-Godavari basin.

To do the groundwork for the committee, the finance ministry has asked banks to take stock of stalled as well as new projects where banks have disbursed or sanctioned loans.

In sectors like power, coal, iron, steel and road transport, 215 projects with an investment of Rs 7 lakh crore are currently stalled and banks have disbursed Rs 54,000 crore. The projects are stuck mainly due to issues related to coal linkage, environment clearances and land acquisition. There are 126 new projects with an outlay of Rs 3.55 lakh crore and the amount sanctioned by banks is Rs 43,000 crore.

“Now there is a movement in iron, steel and cement. The real problem is in road and power. There are 68 new projects in the road sector. There are 40 new projects in the power sector. We have to get them going,” Chidambaram had said on Monday, adding the finance ministry would start taking sectoral meetings with state governments and promoters to see how the government could move these forward.

The investment rate in the economy stood as high as 38.1 per cent of GDP in the pre-crisis period of 2007-08. From there on, it fell 34.3 per cent in the crisis period of 2008-09. However, it again improved to 36.9 per cent the next year, on a heavy dose of stimulus given by the government.

It, however, fell to 34.7 per cent in 2010-11 and stood at the same rate in the following year. In the current financial year, it is projected to grow to 35.3 per cent. The high investment rate is critical for the economy to pull it out from the decade-low growth rate of five per cent, pegged by official data for the current financial year.