Informist, Friday, Jul 5, 2024

--Fin min source: IOC Apr-Jun capex 88.98 bln rupees, 29% of FY25 aim

--Fin min source: BPCL Apr-Jun capex 21.4 bln rupees, 16% of FY25 aim

--Fin min source: HPCL Apr-Jun capex 32.3 bln rupees, 25% of FY25 aim

--Fin min source:ONGC Apr-Jun capex 79.55 bln rupees, 26% of FY25 aim

--Fin min source: NTPC Apr-Jun capex 74.1 bln rupees, 33% of FY25 aim

--Fin min source: NHAI Apr-Jun capex 300 bln rupees, 18% of FY25 aim

--Fin min source: Railways' Apr-Jun capex 562 bln rupees

By Priyasmita Dutta

NEW DELHI – Large state-owned companies made an "unexpectedly" slower start on capital expenditure this year, spending 1.46 trln rupees in Apr-Jun, or about 19% of the full year's aim of 7.77 trln rupees, a senior finance ministry official said today. This was nearly a little over half of the amount they spent in the year-ago period. In Apr-Jun last year, these public sector enterprises had spent 2.38 bln rupees or 32% of the full year's aim.

The finance ministry tracks capital expenditure of public sector companies that have an annual investment target of over 1 bln rupees. The Interim Budget for 2024-25 (Apr-Mar) set a cumulative capital expenditure target of 9.01 trln rupees for all public sector undertakings, up 7.2% on year. Of the total, state-owned companies with over 1 bln rupees of annual capital expenditure target account for 7.77 trln rupees.

"Though the government is confident they will meet their targets for the full year, the first quarter was unexpectedly slow. PSUs (public sector undertakings) are somehow not keeping up with the rhythm of last year," the official told Informist. "In April, the impact of the Model Code of Conduct was not adversely felt, possibly because a few projects were already in the pipeline, but May-Jun was particularly very slow," the official said.

The Model Code of Conduct came into effect on Mar 16. Central and state governments could not announce new investments, but could only take forward the projects already underway. The Lok Sabha elections were scheduled from Apr 19-Jun 1 and the results were announced on Jun 4.

Though capital expenditure was much slower this fiscal so far, the trend in sectoral spending was pretty much the same as last year. Spending in the first quarter was predominantly led by the railways, followed by the road and oil sector, the official said. In the previous financial year as well, these three sectors had performed well, especially the road sector, data showed. Even as the railway and road sector did well in Apr-Jun, their spending was much lower than last year's spending during the same period.

The Indian Railways and public sector companies under the railway ministry have together spent 562 bln rupees in the first three months of the year, against the 798 bln rupees they had spent in the year-ago period. The Indian Railways alone is budgeted to incur 2.65 trln rupees of capital expenditure in 2024-25, up 2% from the revised estimate of 2.60 trln rupees in the previous year. Of the total capital expenditure of 2.65 trln rupees by the railways, 2.52 trln rupees is provided from the Budget.

The National Highways Authority of India spent about 300 bln rupees in Apr-Jun, accounting for 18% of its annual target, the official said. This is sharply lower than the 799 bln rupees it had spent in the corresponding period last year. For the full year, NHAI is set to spend 1.68 trln rupees as capital expenditure, up marginally by 0.6%.

"The road sector is in good shape, so from July onwards capital spending should significantly improve," the official said. "After the Budget is presented, the government may ramp up spending on the road sector," the official added. Finance Minister Nirmala Sitharaman is expected to present the Budget for 2024-25 in the third week of July.

Among oil PSUs, Indian Oil Corp Ltd spent 88.98 bln rupees in Apr-Jun, or 29% of the full-year's target of 309.09 bln rupees. In the first three months of the current financial year, Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd spent 32.33 bln rupees and 21.38 bln rupees, or 25% and 16.4% of their annual targets, respectively. HPCL has earmarked 125 bln rupees for capital expenditure in 2024-25 while BPCL is set to spend 130 bln rupees.

Oil and Natural Gas Corp Ltd's capital expenditure for Apr-Jun was 79.55 bln rupees, accounting for 26% of the annual target of 308 bln rupees, the official said.

Power major NTPC Ltd spent 74.11 bln rupees in Apr-Jun, accounting for 33% of its target for the full year, the official said.

The performance of public sector companies is monitored by the government, which has been trying to push capital expenditure to spur private investment. In the past five years, the government has increased capital expenditure by more than three times to 11.11 trln rupees in 2024-25 from 3.36 trln rupees in 2019-20.

In the year ended Mar 31, these large public sector enterprises spent 8.05 trln rupees collectively, overshooting the target of 7.42 trln rupees. End

Edited by Akul Nishant Akhoury

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