From fiscal 2015-16, the Centre is likely to ask Central Public Sector Enterprises (CPSEs) to borrow more to fund their projects. This is said to be in line with the 14{+t}{+h} Finance Commission’s recommendations.
The CPSEs are “under-leveraged” in terms of raising debt on the basis of their net worth, the Commission is understood to have opined. It believes that the Centre, being the owner, has the first right on the CPSEs’ cash and balances, which should be used for development.
The Commission is in favour of operational, rather than financial, autonomy for CPSEs.
The Commission’s recommendations are binding on the Centre as the body was constituted by the President. The recommendations, which the Finance Ministry is studying, will be valid for five years from April 1, 2015. The Centre is likely to make them public during the Budget in February. At present, there are 277 CPSEs, of which 229 are in operation and 48 under construction. The total investment in these CPSEs exceeds ₹8.50 lakh crore.
Of the 229 operational CPSEs, 149 are making profit, 79 are incurring losses, and one is breaking even. According to a survey by the Department of Public Enterprises, the CPSEs had ‘cash and balances’ of about ₹2.66-lakh crore as on March 31, 2013.
Since the Centre is a majority shareholder in the CPSEs, getting board approvals for borrowing will not be difficult.
Currently, the CPSEs are clubbed into categories such as Maharatnas, Navratnas and Mini Ratnas, which give them different levels of financial autonomy.
For example, Maharatna CPSEs such as ONGC, Coal India, SAIL, BHEL, GAIL, Indian Oil and NTPC have the powers to decide on investments of up to ₹5,000 crore, or 15 per cent of their net worth, in one project by themselves.
Navratnas, such as PowerGrid and Oil India besides 15 others, can decide on investments of up to ₹1,000 crore or 15 per cent of net worth in one project.
CS Verma, Chairman, SAIL, said the company “borrows partially to meet its capital expenditure requirements for ongoing capacity expansion and modernisation. The current expansion and modernisation programme of SAIL has been funded two-thirds by way of internal accruals and one-third by way of borrowings.”