Govt companies, departments way short of capital expenditure target

CPSEs met only 63% of spending target by December

Despite Finance Minister Nirmala Sitharaman pushing central public sector enterprises (CPSEs) to frontload capex, government-owned companies were able to spend only 63.3 per cent of their annual capex target of Rs 5.95 trillion in the first nine months of FY22. Slow capex by CPSEs, as well as central ministries may prove to be a hurdle for the finance minister, who is expected to substantially raise the capex allocation in the FY23 Budget.

A government official said CPSEs spent only Rs 3.76 trillion towards capex until December.

In a letter last month, Sitharaman had urged Railway Minister Ashwini Vaishnaw to hold weekly meetings to ensure that at least 75 per cent of his department's capex target is met by the end of December 2021 and 100 per cent by March 15, 2022. “It is noted that the capex performance of your ministry until November 2021 was only 61 per cent of the budget target. For all infrastructure ministries put together, the numbers indicate a continuation of sluggish performance,” Sitharaman said. In an earlier letter in September, the finance minister had urged Vaishnaw to frontload capex of the Railways Ministry to stimulate the economy through public spending, “especially when private investments into the ecoomy are yet to pick up”.

Though there were some early signs of private investment recovery, the Omicron variant dented both consumer and investor sentiment. Sitharaman, who will present the Budget in the thick of the third Covid wave, is likely to stay the course and push for at least Rs 6.5 trillion capex by ministries for FY23, up from Rs 5.5 trillion in FY22, Business Standard reported. But the sluggish trend in capex by ministries (only 49 per cent of the annual target until November) despite a 26 per cent increase in the allocation for FY22 has raised concern among observers.

The government is expected to continue to emphasise the National Infrastructure Pipeline and the National Monetisation Pipeline in the upcoming Budget to revive investment and augment government revenues. The Gati Shakti panel is expected to make the process of identification and monitoring of infrastructure projects under the National Infrastructure Pipeline relatively efficient and smooth.

Sitharaman first in June 2021 asked ministries to frontload their FY22 capital expenditure and urged them to explore public-private partnerships for viable projects, holding that enhanced capex would play a critical role in revitalising the economy after the pandemic.

In her review in October last year, Sitharaman directed officials in the Department of Economic Affairs (DEA) to work closely with the Ministry of Civil Aviation to ensure that more projects are initiated and capex spending in FY23 is substantially increased.  She also asked the Department of Telecommunications to push its CPSE capex, fast-track asset monetisation, and work in close coordination with the disinvestment department to finalise the process of monetisation at the earliest, ensuring expeditious implementation of digital expansion plans in the entire northeast region.

In a review with the Ministry of Road Transport and Highways in May, she had suggested that the ministry may shift from quarterly to monthly review of specific projects for the completion of those projects in time. In her discussion with the Ministry of Petroleum and Natural Gas, the finance minister observed that since refineries are key infrastructure assets and their progress is an important part of the infrastructure sector.