Investment Patterns in Central Public Sector Enterprises (CPSEs)

There are growing concerns within government sections regarding the shift in investment patterns of CPSEs. Traditionally funded through Internal and Extra Budgetary Resources (IEBR), CPSEs are increasingly turning towards higher budgetary support from government equity and loans for capital expenditure, especially in key infrastructure sectors like telecom, railways, and road transport.

Impact on Infrastructure Sectors

• This trend restricts CPSEs' ability to execute their own capital expenditure plans, deviating from the National Infrastructure Pipeline's envisaged path.
• For the road sector, a 38% share was planned to be funded through private capital for entities like the National Highways Authority of India (NHAI). However, IEBRs have been declining over the past five years.
• A major concern is the reduction of IEBRs in NHAI to nil in FY 2022-23 and FY 2023-24, primarily due to rising indebtedness.

Case Study: National Highways Authority of India (NHAI)

NHAI's debt has seen a significant increase from Rs 23,797 crore in March 2014 to Rs 3.48 lakh crore in March 2022. The Standing Committee on Transport highlighted that high budgetary support might not suffice for NHAI's investment needs.

Trends in IEBR and Budgetary Support

• IEBRs mobilized by CPSEs have dropped from Rs 6.42 lakh crore in FY20 to Rs 3.63 lakh crore in FY23, with further projected declines.
• Investment in CPSEs through budgetary support has increased over 150% from Rs 2.10 lakh crore in FY20 to Rs 5.48 lakh crore in FY25.

Concerns and Observations

• Experts express concerns about CPSEs prioritizing dividend payouts over reinvestment for growth, limiting their development potential.
• Government pressure on CPSEs for dividends restricts their autonomy and long-term growth capacity.
• Mergers and acquisitions among PSEs adversely affect their cash reserves, reducing funds available for fresh capital expenditure.

Components of Capital Expenditure

Capital expenditure by CPSEs consists of spending by government departments and ministries, supported by gross budgetary support (GBS) from the central government. IEBR include internal resources like profits and reserves, and EBR, which involves bonds, debentures, and external loans.

Conclusion

The shift in investment patterns of CPSEs towards higher reliance on budgetary support poses challenges for infrastructure sectors, affecting their growth and investment strategies. This trend calls for a balanced approach to ensure sustainable development and autonomy for CPSEs.