Explain Rs 60,000-crore buy outside GeM, FM Sitharaman tells PSUs

Top PSUs told to frontload capex to lift economic growth

The top 32 state-owned enterprises have committed to spend nearly Rs 1.53 trillion in capital expenditure for fiscal year 2019-20, Finance Minister Nirmala Sitharaman said on Saturday, after meeting heads of ‘maharatna’ and ‘navratna’ PSUs.

Sitharaman also said the ministry was looking into Rs 91,000 crore worth of purchases done by the government and PSUs outside the government e-marketplace (GeM) for goods and services. Of this, Rs 60,000 crore of purchases have been carried out by PSUs.

“It came as a shock,’’ the minister said, pointing out that Rs 60,000 crore worth of purchases by PSUs were made outside the GeM even when those goods and services were available on the government’s e-marketplace platform. 

“There should be some reason. I have asked them to tell me why they found it fit to purchase these outside the GeM,” Sitharaman added. Expenditure Secretary Girish Murmu, who was also at the media briefing after the meeting with PSUs, clarified that around Rs 31,000 crore of similar purchases came from the government department.

At the meeting, Sitharaman asked the PSUs to frontload their capital expenditure and clear their outstanding dues by October 15. The idea is to give a boost to the economy through the frontloading of expenditure. The PSUs have also been directed to set up portals by October 15 to enable monitoring of the status of payments. The PSUs were told to come up with their capex requirements for the next four quarters, similar to what central government departments were told on Friday.

While briefing the media, Finance Secretary Rajiv Kumar said the 32 major PSUs had spent Rs 48,077 crore in capex from April to August. 

For the October-December quarter, they have pegged their capex pipeline at around Rs 50,159 crore, and for January-March the commitment is around Rs  54,700 crore, taking the total close to Rs 1.53 trillion. Besides Kumar and Murmu, Economic Affairs Secretary Atanu Chakraborty was also present.

When asked if this commitment was an increase compared to what PSUs were planning beginning of the fiscal year, Murmu said it was exactly the same. The capex commitment may increase as some of the PSUs have plans to raise more from the market and others have indicated they may need more gross budgetary support. Chakraborty said that the PSUs' capex plan will not affect their ability to pay dividend to shareholders or buy back shares.  

To deliberate on whether bank guarantee is turning into a hurdle, a meeting is being planned between the Reserve Bank of India (RBI), the finance secretary and select PSUs. “We will see why bank guarantee is becoming a big hitch or hurdle in the government paying up the 75 per cent post arbitration awards. If that is the case, I want RBI help also. The finance secretary will sit with RBI and sort this out," the minister said.

Sitharaman added that PSUs would review post-arbitration claims without compromising the companies’ interests. Murmu said the 32 PSUs had Rs 49,000 crore worth of arbitration and Rs 43,000 crore of counter-claims pending.

An official statement after the briefing gave details of spending plans by some of the bigger PSUs. For instance, ONGC has a capex plan of Rs 32,921 crore for FY20. Its capex till August 2019 was Rs 8,777 crore which was 26.66 per cent of the total. Indian Oil has a capex plan of Rs 25,083 crore, of which Rs 8,173 crore (32 per cent) has been spent. NTPC has made a capital expenditure of Rs 8,490 crore, which is 42 per cent of its total plan of Rs 20,000 crore.