PSU cash may go to core projects

Diversification into infrastructure projects mulled.

The government may dip into the reserves of public sector companies to spur public investment in the country.

A group of ministers (GoM) will shortly consider a proposal to utilise surplus cash and reserves of public sector companies for their diversification into infrastructure.

According to a paper prepared by the Planning Commission for the GoM on public investment, surplus cash and reserves of the top 50 PSUs are estimated at nearly Rs 3,50,000 crore. Of this, one-third was in the form of bank deposits and the rest in bonds, with a large chunk in government bonds, a Planning Commission functionary told Business Standard.

"At present, a large part of the funds is used to finance the government's fiscal deficit, which is not the best way to utilise the funds," said the official.

According to the official, Bharat Sanchar Nigam Ltd is sitting on reserves of around Rs 20,000 crore, while Oil and Natural Gas Corporation has reserves and surplus of Rs 46,382 crore at the end of March 2005.

"If Reliance, which was a petrochemicals company, can diversify into telecom, a similar strategy can be used by SAIL or NTPC," an official said.

Finance ministry officials added that most public sector companies did not have a concrete capital expenditure plan, which could use the idle reserves and surplus. The ministry is in favour of seeking special dividends, which will help the Centre carry out its fiscal deficit reduction plan.

The petroleum ministry had asked ONGC, Engineers India Ltd and GAIL (India) Ltd to pay special dividends. ONGC has, however, said that it does not have significant reserves to pay special dividends, but has agreed to consider interim dividends later.

The Planning Commission official pointed out that it might not be feasible for the government to receive the entire amount in the form of dividends as companies would then have to depend on the Centre's assistance as and when they firmed up their capital expenditure plans.

The official also said it could prove difficult for the government to ensure that the entire Rs 3,50,000 crore were used to spur public investment as some of it had been transferred to the depreciation reserve.

Officials said the GoM would consider ways to utilise the funds and would also examine if shareholders agreements or the articles of association of some of the PSUs required amendments to facilitate diversification.

Companies like ONGC have moved ahead with diversification, developing special economic zones and setting up power plants.