Co-presented by

PSU capex push: FM may be eyeing a non-existent cash pile

In an economy where the private sector is hesitant about investing, the only way out for the government to kick start the investment cycle is by pushing public sector companies to spend.

And this what Finance Minister P Chidambaram is also trying to do.

 PSU capex push: FM may be eyeing a non-existent cash pile

Moreover, there is a limit to which the government can intervene in the functions of its companies. Reuters

In a Google Hangout after the budget, the finance minister had said the government has sent letters to state-run companies seeking details of their capex targets for the next year.

He said beginning April, the government will monitor the capex "very closely".

"Every quarter, I will monitor what they are investing and if they don't invest, we will hold the CMD (chairman and managing director) to account," he had said.

However, it may not be that easy for Chidambaram for the simple reason that these companies do not have the cash hoard he thinks they are sitting on.

According to a report in the Business Standard today, poor profitability and increasing capital expenditure have taken toll on the cash pile of most of the PSUs over the last few years.

Many others are completely dependent on borrowings, which makes their financial position weak, the report said.

The cash and equivalents-to-assets ratio of top 50 public sector companies has declined to 14 percent in the first six months of the current financial year from 26 percent in 2009-10, the report said.

Moreover, there is a limit to which the government can intervene in the functions of its companies.

"The cash management is a commercial decision best left to the firms' managements. Forcing companies to invest could lead to adverse selection of projects, impacting future income flows and putting them in jeopardy," CARE Ratings MD & CEO D R Dogra has been quoted as saying in the report.

Your guide to the latest election news, analysis, commentary, live updates and schedule for Lok Sabha Elections 2019 on firstpost.com/elections. Follow us on Twitter and Instagram or like our Facebook page for updates from all 543 constituencies for the upcoming general elections.

Updated Date: Dec 20, 2014 16:31:15 IST