Less rise in allocation to PSEs in Budget 2017

After a 11.7% rise in FY17, the budgeted rise this time is 4.7%

The Union Budget proposals would squeeze funding to public sector enterprises (PSEs).

Budgetary support via both equity contribution and loans is stated to grow five per cent in 2017-18 to Rs 1.18 lakh crore, up from Rs 1.12 lakh crore in 2016-17 (Revised Estimates). In 2016-17, it grew by 11.7 per cent, as against a budgeted target of 4.7 per cent for that year.

At a time of growing clamour for greater public sector investments, the total capital outlay of PSEs has been budgeted to contract by three per cent in 2017-18 to Rs 5.03 lakh crore, from Rs 5.19 lakh crore in 2016-17.

So, excluding government support, the capital outlay of PSEs has been budgeted to contract by 5.3 per cent in 2017-18 to Rs 3.85 lakh crore, down from Rs 4.06 lakh crore in 2016-17 (RE).

With private investment showing no sign of revival, this contraction is likely to have consequences. Official data shows gross fixed capital formation is expected to contract by 0.2 per cent in 2016-17. In the first half, it fell by 4.4 per cent. While this is expected to reverse in the second half, these estimates were based on data before demonetisation was announced. A clearer indication of how investments have fared this year will only be available when the Central Statistics Office issues its third-quarter estimates later this month.

Allocations to four sectors — railways, roads, urban development and banking — account for roughly 90 per cent of total government support in 2017-18. Allocations to these have risen by 4.1 per cent, from Rs 1.01 lakh crore in 2016-17 to Rs 1.06 lakh crore.

The ministry of railways will get the highest allocation at Rs 55,000 crore, up from Rs 46,355 crores the year before. Budgetary support for the ministry of road transport and highways will rise from Rs 14,976 crore to Rs 23,891 crore; that for urban development would increase to Rs 17,810 crore, from Rs 15,570 the year before.

Funds for public sector bank recapitalisation, though, will fall from Rs 25,000 crore in 2016-17 to Rs 10,000 crore in 2017-18.

Of the total budgetary support of Rs 1.18 lakh crore in 2017-18, Rs 1.02 lakh crore is through equity contribution, with the balance Rs 15,759 crore in the form of loans to PSEs.

Revised estimates show that in 2016-17 the government ended up providing greater support to PSEs than it had originally budgeted. In his 2016-17 budget, the finance minister had budgeted for this support to grow 4.7 per cent, to Rs 1.05 lakh crore. The RE shows it actually went up by 11.7 per cent, to Rs 1.12 lakh crore.

Excluding budgetary support, capital outlay of PSEs also increased in 2016-17 more than what was originally planned. As against budgeted growth of 27.8 per cent, it grew by 30.5 per cent. As a consequence, total capital outlay by PSEs grew 25.9 per cent in 2016-17, to Rs 5.19 lakh crore. It was originally estimated to grow 22.2 per cent, to Rs 5.04 lakh crore.