Government asks PSUs like CIL, ONGC, NMDC, NTPC to either invest or pay dividends on their surplus funds
Govt has asked PSUs to spend the Rs 2 lakh crore cash pile they are sitting on. For their part, the companies themselves have big spending plans.
As of 2011-12, according to ET estimates, PSUs were sitting on cash of close to two lakh crores – the actual figure is almost certainly more since we only included large listed PSUs.
And while the central government owns a few hundred PSUs, just five of them – Coal India, ONGC, NMDC, NTPC, and Oil India account for around Rs 1.35 lakh crore of the total cash surplus of PSUs.
When asked about their expansion plans by ET, India’s cash rich PSUs had ready answers. Whether or not they will actually put their money where their mouths are, is a different matter.
Part of the problem is the climate of uncertainty created by having to operate under constant scrutiny of a range of oversight bodies such as the Comptroller and Auditor General (CAG) and the Central Vigilance Commission (CVC).
“If you take business risk, you risk your job. If you don’t take (investment) decisions, maximum you could be transferred,” a senior executive working in ONGC Videsh said, requesting anonymity.
The second biggest exploration firm, Oil India Ltd too has substantial spending plans. “Oil India has a surplus of Rs 13,000 crore, but we intend to invest Rs 19,000 crore in the 12th plan and this excludes acquisitions and diversification,” says Oil India Director-Finance TK Ananth Kumar.
ONGC and Oil India have to invest continuously on seismic surveys, exploratory drilling, developmental drilling, capital engineering projects, R&D, joint ventures and value-chain integration projects.
Given the cash balances, both companies expect to fund their investments largely through internal accruals.
ONGC said it was wrong to think that the surplus was idle and said it was needed for, “discharging various milestone payments such as corporate tax, dividend to shareholders including the govt., dividend tax, major contractual milestone payments for company’s activities on exploration, development, production, etc.”
Coal and Power
Coal India intends to spend its surpluses on equipment procurement, followed by opening of new mines and infrastructure development. Opening of coal washeries on build-operate- maintain basis with participation from private entrepreneurs, is another option for investment that CIL is seriously exploring. Expenditure on R&R schemes and land procurement is also considerable, the company told ET.
CIL is also planning to expedite the creation of railway infrastructure. “There are many projects where there is huge production potential but absence of railway infrastructure for coal evacuation has a slow down affect on production,” the company said. “If this issue is resolved speedily, not only increased quantities of coal would be available to consumers but the coal bearing states also would be benefited monetarily in terms of royalty.”
Meanwhile, a spokesperson of National Thermal Power Corporation (NTPC), told ET that, its cash surplus would be, “…used for funding our 12th Plan projects, initialization of 13th Plan projects, renovation and modernisation of stations and development of our captive coal blocks.”
A senior official of iron-ore producer NMDC says that most of the company’s cash reserves would be used for ‘aggressive’ expansion plans, including a Rs 15,500 crore integrated steel project in Chhattisgarh, pelletisation project, beneficiation plant, slurry pipeline transportation system from Bailadila to Vizag and new iron ore mines. “This apart, the company is also aggressively looking at buying iron ore, coal and rock phosphate assets in the overseas markets,” the official said.
NMDC has obtained the approval of its shareholders at the recently held general meeting for amending the articles of association that pave the way for buyback of shares. The government had divested 8.38% of NMDC’s paid-up capital in March 2010, resulting in the public holding in the company increasing to 10% from 1.62%.