For capex, CPSEs rely more on budgetary support, less on own resources & private capital

Road sector

The reduction in resource mobilisation by the CPSEs on their own and through the private sector is being seen as a reason of concern for the infrastructure sectors, especially the roads sector, sources said. They pointed out that the IEBR in NHAI has been brought down to nil in financial years 2022-23 and 2023-24 and there seems to be no reversal in stance of the resource mobilisation from higher budgetary outlay.

The budgetary outlay support from the government had come after a sharp rise in NHAI’s debt liabilities. NHAI’s debt had risen from Rs 23,797 crore in March 2014 to Rs 3.48 lakh crore in March 2022. Its debt servicing as a share of total allocation was 25 per cent in FY22.

The Standing Committee on Transport (FY22) had at that time noted that high budgetary support alone may not be sufficient to meet the investment requirements of NHAI. The Committee had recommended that the Ministry of Road Transport and Highways may work towards resolving the apprehensions of the private sector which are limiting their participation in the road transport sector in the last few years, by working in close coordination with concessionaires and financial institutions. Queries sent by The Indian Express to the Ministry of Finance on this issue went unanswered.

The IEBRs mobilised by CPSEs came down progressively from Rs 6.42 lakh crore during FY20 to Rs 3.63 lakh crore in FY23 to be met by budgetary support. While it was estimated to come down further to Rs 3.26 lakh crore in FY24 as per the revised estimates, IEBRs then picked up to Rs 3.89 lakh crore as per actual figures. In FY25, it is estimated to have slipped to

Rs 3.82 lakh crore and is now budgeted to rise to Rs 4.31 lakh crore in the FY26.

Investment in CPSEs through budgetary support in the form of equity and loans has meanwhile more than doubled in the five years beginning from FY20. Budgetary support through equity and loans for CPSEs has risen by over 150 per cent from Rs 2.10 lakh crore in FY20 to Rs 5.48 lakh crore in FY25 (revised estimate) and Rs 5.35 lakh crore in FY26 (budget estimate).

Experts and market players have been raising concerns about the change in the capital investment strategies of public sector entities, especially in the context of higher dividend payouts to the government. In a note in October 2024, brokerage Motilal Oswal Wealth Management had said the approach of CPSEs towards capital allocation has raised concerns among investors. “The high dividends suggest a lack of focus on reinvesting for future growth. The government pressures PSUs to prioritise dividend payments over capital expenditures, which hinders their long-term development potential,” it said.

In a separate note outlining the reasons for the decline in PSU shares last year, Bajaj Broking said the backing by the government for PSEs has helped them in several ways but also results in limited autonomy. “The limited control also prevents the companies from making prompt decisions, which negatively impacts their performance and efficiency. However, on the other side, private enterprises enjoy full autonomy and are more flexible. Further, government policies and regulations, like pressuring the PSUs to offer and enhance dividend earnings, also limit a company’s capacity for long-term growth, capital expenditure, and more,” it said.

Mergers and acquisitions among PSEs, as was seen earlier in the case of ONGC-HPCL deal, also adversely impact the cash reserves of PSEs, which then leaves less amount with such entities for incurring fresh capex.

Capex components

Capital expenditure includes two components — spending by line departments and ministries along with gross budgetary support (GBS) to CPSEs. The investment by CPSEs is financed through budgetary support provided by the Central government, which is part of gross budgetary support. IEBR are raised by CPSEs on their own. Internal resources include retained profits net of dividend to government, depreciation provision and carry forward of reserves and surpluses.

The EBR consists of receipts from issuance of bonds, debentures, external commercial borrowings, and term loans from financial institutions. IEBR is below-the-line expenditure which is not included in the fiscal deficit calculation of the government since it is an expenditure in the books of the CPSEs and not the Budget.