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Budgetary allocations for PSUs squeezed in 2016-17

Budgetary support for Plan investments in public enterprises is now projected to grow at a mere 0.4% to Rs 1.04 lakh crore in 2016-17


Ishan Bakshi  |  New Delhi 

Budgetary allocations for PSUs squeezed in 2016-17

With the National Democratic Alliance government reworking its expenditure priorities, pumping more money to tackle distress in rural areas, it has squeezed budgetary support to public sector units (PSUs) in the coming financial year. Budgetary support for Plan investments in public enterprises is now projected to grow at a mere 0.4 per cent to Rs 1.04 lakh crore in 2016-17, up from Rs 1.03 lakh crore in 2015-16.

The Rs 13,000-crore increase in budgetary allocation to railways this year announced by the finance minister has been largely offset by a decline in allocations to other sectors, most notably National Highways Authority of India (NHAI)..

Read our full coverage on Union Budget 2016


As a consequence of this squeeze, PSUs will now have to rely more on mobilising internal resources or raising money through extra budgetary resources to increase capital outlay in the coming financial year.

This is in sharp contrast to 2015-16 when the central government increased budgetary support to public enterprises by a staggering 65 per cent in 2015-16 as opposed to the original allocation. Support for Plan outlay of PSUs went up from a budgeted amount of Rs 62,953 crore to Rs 1.03 lakh crore in 2015-16.

The total Plan outlay of PSUs is now budgeted to grow at 18 per cent in 2016-17, from Rs 4.25 lakh crore in 2015-16 to Rs 5.02 lakh crore in 2016-17. But, excluding government support, Plan outlay of PSUs is projected to grow at a higher pace of 24 per cent, increasing to Rs 3.98 lakh crore in 2016-17, up from Rs 3.21 lakh crore in 2015-16. This increase in Plan outlay is to be funded through a combination of sources, with 33.5 per cent coming from PSUs' own resources, 46.6 per cent accruing by way of issuances of bonds and the balance though a from a mix of other sources.

Budgetary allocations for PSUs squeezed in 2016-17
The four sectors that account for the bulk of public sector investments are railways, petroleum and natural gas, road transport and highways and power. Put together, these account for roughly 70 per cent of the total Plan outlay of PSUs.

Railways, by far, has the biggest Plan outlay in 2016-17. Total Plan outlay is projected to grow at 24 per cent, from Rs 97,493 crore in 2015-16 to Rs 1.21 lakh crore in the coming financial year. Of this, budgetary support is expected to be around Rs 45,000 crore, with the balance being raised by railways - Rs 16,675 crore through internal resources and Rs 59,325 crore by issuance of bonds.

Interestingly, railways was the only sector where actual spending during the current financial year is lower than the budgeted amount.

As opposed to a Plan outlay of Rs 98,365 crore, actual spending was marginally lower at Rs 97,493 crore. With capital spending not up to projections, government support was reduced during 2015-16 to Rs 32,000 crore as opposed to the original allocation of Rs 40,000 crore.

Surprisingly, despite roads being a key sector, budgetary support to NHAI has been brought down to Rs 19,653 crore in 2016-17 as opposed to Rs 29,420 crore in 2015-16. NHAI's total capital outlay is now projected to grow to Rs 78,932 crore, up from Rs 57,420 crore in 2015-16 - an increase of 37 per cent. This implies that the agency is expected to raise Rs 59,279 crore through issuance of new bonds.

PSUs' Plan outlay in the petroleum and natural gas sector is projected to grow by a modest 13 per cent in 2016-17, largely on the back of greater investments by Bharat Petroleum, Indian Oil Corporation and ONGC Videsh. In 2015-16, the Plan outlay for PSUs in this sector had barely exceeded budgeted projections. While some companies such as ONGC saw total Plan outlay fall from the budgeted Rs 36,249 crore to Rs 31,467 crore in 2015-16, others like Bharat Petroleum Corporation, Indian Oil Corporation and Oil India spent more compared to the budgeted amount. In the power sector, the Plan outlay is now expected to rise 17 per cent in 2016-17. The increase is powered by an increase in spending in equal measure by NTPC and Power Finance Corporation. The total capital outlay had increased by seven per cent in 2015-16 from budgeted estimates.

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First Published: Fri, March 04 2016. 00:33 IST