India's Troubled Rs 324,675 Crore Budget For State Owned Enterprises

Imagine drawing up your annual home budget. With an eye on your income and limited prospects for a salary raise, you budget for Equated Monthly Instalments (EMI) for a Maruti small car. Mid-way you buy a BMW 5 Series sedan. On the other hand, the funds you’ve set aside for buying a house lie unused because you can’t take a decision on which one.

In some ways, the Government of India has been doing precisely this, allocating smaller amounts for investments in its public sector units (read support) but spending more or not spending at all. In many cases, it’s useful to know the heads on which the Government is setting funds aside, whether or not it rises or falls subsequently.

Air-India is a classic example. The airline owes roughly Rs 44,000 crore, half of which is working capital loans and has additional, accumulated losses of Rs 22,000 crore. There are other sums, like Rs 2,000 crore owed to oil companies but that’s a different story. But the Budget documents barely hint at this possibly because it accepted that the banks will be leaned upon.

IndiaSpend’s Sourjya Bhowmick looked at the entire investment outlay for state-owned enterprises of the Government of India for 2012-13 if only to record what perhaps will be only a portion of the final amount spent. To be fair, not all public sector enterprises are guzzlers like Air-India which distort the picture. And equally, there are heads like shipping where a slowdown in decision making or lack of opportunities has resulted in money lying unspent.

Bad Financial Planning

More examples: The Department of Atomic Energy had a plan outlay of Rs 5,615 crore in 2011-12 which was revised to Rs 6,179 crore later. The Ministry of Finance (Department of Financial Services) saw its plan outlay go up from a budgeted Rs 6,000 crore in 2011-12 to Rs 12,000 crore in the revised estimates.

A Shipping Corporation of India had a plan outlay of Rs 3,712 crore which went down to Rs 2,850 crore. This is attributed to a slowdown in ship acquisitions.

Budget 2012-2013 as a whole had a plan outlay of Rs 3,24,675 crore. Of this, equity contributions were Rs 60,265 crore while the loan contribution was Rs 3,927 crore. The total investment as equities and loans amount to Rs 64,192 crore this year.

The total investment in equity has seen an increase of Rs 10,784 crore from the Revised Estimates of 2011-2012, when it was Rs 49,482 crore. Investment as Loans however has decreased to the tune of Rs 3,742 crore from the Revised Estimates. The table below tells you more;

*Increase: In the Budget 2012-2013 from the Revised Estimates of 2011-2012

(Rs In Crores)

Source: Union Budget

The Air India Conundrum

Let’s return to Air-India. The Ministry of Civil Aviation has set aside Rs 10,866 crore (plan outlay+ equity + loan) for the current year. This includes a plan outlay of Rs 4,928 crore and an equity infusion of Rs 4,000 crore. Thus, an amount of Rs 8,928 crore is investment on Air India this year, which leaves only Rs 1,938 crore on the other entities of Civil Aviation. Remember again, this is at Budget 2012 time, not the story now which is different.

The Airport Authority of India (AAI) got Rs 1,715 crore as plan outlay as well as Rs 5 crore as equity. Another Rs 223 crore would go for supporting Air India Charters Limited (gets Rs 5 crore as Plan outlay), Hotel Corporation of India Limited and Pawan Hans Helicopters Limited as these are the remaining entities of the Ministry.

Pawan Hans gets Rs 158 crore as Plan outlay and Rs 5 crore as equity. Hotel Corporation of India Limited gets Rs 50 crore, equally divided as Plan outlay and Equity. Evidently, the country’s ambitious airport development plans will be subsumed by what Air-India would gobble up. The Hotel Corporation which runs the not so successful Centaur Hotel in Delhi and another property in Srinagar is seen as a drag.

Let’s look at the other ministries. The top 5 Ministries getting a large plan outlay are:

Source: Union Budget

Largest Plan Outlay: Petroleum

The Oil and Natural Gas Corporation Limited( ONGC) and Indian Oil Corporation Limited lead the Petroleum and Natural Gas Ministry tables with Rs 33,065 crore and Rs 10,000 crore respectively. This could involve some subsidy accounting as well.

Gas Authority of India Limited (GAIL) comes third with Rs 9,447 crore. Balmer Lawrie & Co. Limited gets the lowest amount of Rs 55 crore.

In the Ministry of Power, National Thermal Power Corporation (NTPC) gets Rs 20,995 crore and Power Grid Corporation Limited gets Rs 20,000 crore. Damodar Valley Corporation is a distant third with Rs 5,572 crore and Tehri Hydro Development Corporation Limited gets the lowest amount of Rs 565 crore.

In the Ministry of Steel, Steel Authority of India Limited (SAIL) and NMDC Limited are the top two with Rs 14,500 and Rs 4,655 crore respectively. Ferro Scrap Nigam Limited gets the lowest amount of Rs 12 crore.

The Ministry of Railways and the Ministry of Road Transport and Highways have no sub components like these three ministries. The total outlay goes for Indian Railways and National Highway Authority of India.

Plan Outlay + Institutions

There are other organisations and PSU’s who also get a huge amount but are outside this top five Ministries. The following table gives an idea:

Source: Union Budget

Now, let’s look at the breakdown of equity and loans, which in theory and practice could mean different things. Let’s look at the top 5 recipients of equity infusions:

Source: Union Budget

Railways Leads The Pack

The Indian Railways gets the highest. The National Highway Authority of India (NHAI) is the only component of the Road Transport Ministry with an investment of Rs 11,436 crore in the form of equity. Interestingly, the NHAI has a total investment of Rs 32,944 crore (Plan outlay+ Equity + Loans), while loans given to the NHAI amount to Rs 36 crore.

Next is the Ministry of Finance where the Public Sector Banks’ gets Rs 14,888 crore as equity investment. NABARD comes second with Rs 500 crore. Export-Import Bank and the Regional Rural Banks get the lowest investment of Rs 200 crore each.

A sum of Rs 3,165 crore is set aside for equity component in Urban Development. These include Delhi Metro at Rs 1,113 crore followed by Chennai Metro and Bangalore Metro who have an investment of Rs 990 and Rs 900 crore respectively. Jaipur Metro has the lowest investment of Rs 14 crore.

The following table gives an idea of other public sector units which get equity infusions;

Source: Union Budget

Now, let’s look at the loan portfolio.

Source: Union Budget

The total loan given to these four ministries is Rs 3,688 crore. Total loans this year has been Rs 3,927 crore. Just Rs 239 crore is divided up in the form of loans to all other ministries and departments.

In the Ministry of Urban Development , Delhi Metro gets Rs 1,004 crore as a loan, followed by Bangalore and Chennai Metro who get Rs 771 crore and Rs 658 crore respectively. Jaipur, Kochi and Mumbai Metro which are still not operational get loans of Rs 11 crore each.

Interestingly, Prasar Bharati which runs Doordarshan and All India Radio and is a part of the Ministry of Information & Broadcasting has got loans of Rs 401 crore. Prasar Bharati is also likely to embark on a financial restructuring exercise.

In power, the National Hydro Electric Corporation Ltd gets the highest amount of loans in the Power Ministry of Rs 270 crore, followed by North Eastern Power Corporation Limited which gets Rs 80 crore.

In the Ministry of Chemical and Fertilisers, the Department of Fertilisers with its 8 PSU’s gets a loan of Rs 244 crore, where Brahmaputra Valley Fertiliser Corporation Ltd and Madras Fertilisers Ltd gets the highest with Rs 95 crore and Rs 88 crore respectively.