FY23 capital outlay plan for CPSEs projected to dip 1.21% year-on-year

Govt to shift part of CPSEs debt to itself as it infuses more equity

Even as the emphasis of the Budget 2022-23 is on capex-led growth, the capital outlay plan of central public sector enterprises (CPSEs) remains subdued for the year. The outlay of all CPSEs in 2022-23 is projected to decline 1.21 per cent to Rs 8.31 trillion year-on-year.

This is despite the fact that the current financial year is projected to witness a decline of 1.3 per cent at Rs 8.40 trillion in this capital outlay over that in pre-covid period of 2019-20. However, compared to the previous year the outlay is projected to witness a rise of 23 per cent.

This means the capital outlay of CPSEs would decline in 2022-23 from the 2021-22 level, which itself saw a fall over the pre-Covid period.

And if compared with the pre-Covid period of 2019-20, the capital outlay of CPSEs in 2022-23 is projected to decline by 2.5 per cent.

This is despite the projected increase in equity infusion by the government in CPSEs by 9.3 per cent at Rs 3.3 trillion during 2022-23 year-on-year. On the other hand, the loans given by the government to CPSEs would decline by 17 per cent at 26,489 crore.

This has has seen the projected budgetary support by the government to CPSEs rise by 6.8 per cent, to Rs 3.6 trillion during the next financial year from 3.4 trillion in FY22.

CPSEs resources, including internal and debt to be raised from the markets, are projected to decline by 6.6 per cent, to Rs 4.69 trillion. The resources are projected to decline year-on-year in the Covid affected current financial year as well as the previous year. (See chart).

Internal resources of CPSEs has remained subdued all these years. These are projected to rise a bit to Rs 2.54 trillion during 2022-23, from Rs 2.49 trillion in FY22 (RE). However, CPSEs had bit higher resources at Rs 2.57 trillion during 2020-21 (RE). The pre-Covid period of 2019-20 saw internal resources of CPSEs at just Rs 2.22 trillion.

These enterprises are projected to raise 18.80 per cent less, at Rs 64,742 crore, via bonds and debentures in the next fiscal, compared with Rs 79,740 crore in the current financial year (RE). Even during the first Covid wave of 2020-21, CPSEs raised a higher amount at Rs one trillion compared to the current financial year, though this was lower by 29 per cent than the Rs 1.4 trillion mobilised pre-Covid.

CPSEs are projected to raise 28 per cent more at Rs 46,616 crore through external commercial borrowings during the next financial year compared to Rs 36,277 crore in the current financial year (RE). However, they are projected to raise 23 per cent more in the current financial year, primarily on the low base of Rs 29,513 crore during 2020-21.

Basically, the government is relying more on equity infusion for supporting CPSEs than loans. For instance, it will extend the entire support of Rs 1.3 trillion to the National Highway Authority of India (NHAI) through equity infusion in FY23. In the past two years too, the government had given full support via equity infusion only. However, the big difference this time is that the Authority is not projected to raise any resources from the markets, whereas in the previous years it had. For example, in the current financial year, its debt resources from the markets are pegged at Rs 65,000 crore, while the government is projected to infuse Rs 57,350 crore equity into NHAI.

However, finance minister Nirmala Sitharaman said in her Budget speech that Rs 20,000 crore will be mobilised through innovative ways of financing to complement the public resources for national highways network in 2022-23. The national highways network will be expanded by 25,000 km in 2022-23.

India Ratings chief economist Devendra Pant said the government is infusing more equity in CPSEs. It is giving more in terms of equity than by way of loans in budgetary support.

For instance, instead of NHAI borrowing from the markets, it is the government that will borrow and give this money to the Authority in the form of equity, he said.

"When NHAI borrows, it is at a higher interest rate than the government. There is always a spread between NHAI borrowing cost and the GoI borrowing cost,"Pant said.

Icra chief economist Aditi Nayar said the government has shifted a part of the funding for NHAI's capex onto its own books in the form of budgetary support, to prevent a further build-up of debt at the NHAI.

The overall increase in the capital outlay for the roads sector, including the GoI’s direct spending and budgetary support and the NHAI’s own resources, is limited, she said.

She said the 25 per cent capex growth by the government in the Budget for 2022-23 figure must be interpreted judiciously on a few counts, including the equity infusion into NHAI as cited above.

Also, the budget has allocated Rs 44,720 crore for capital infusion in BSNL, similar to its Rs 600 crore equity infusion in Air India in FY22. These amounts, along with special assistance to the states, of Rs one trillion for capital expenditure, are quite large and should ideally be excluded while assessing the growth impulse of the Centre's capex during 2022-23, Nayar said.

Capital outlay of Central Public Sector Enterprises

Financial year	2020-21		2021-22		2022-23
	(Rs cr, actual)	% growth YoY	(Rs cr, RE)	% growth YoY	(Rs cr, BE)	% growth YoY
Capital outlay	6,83,232.60	-19.8	8,40,245.10	23.0	8,30,075.10	-1.21
Equity infusion by govt	1,16,733.80	-39.4	3,05,788.20	161.9	3,34,133.50	9.3
Loan by govt	88,849.30	406.26	31,967.90	-64.0	26,488.80	-17.1
Resources of CPSEs*	6,45,488.40	-9.1	5,02,488.90	-22.10	469,452.75	-6.6

* Internal accruals as well as debt raised/to be raised; Source: Budget documents