Psus seek govt support for capital expansion

Devika Banerji, New Delhi
Business Standard
State-owned enterprises are depending more on government money to fund their capital expansion in the wake of the economic downturn.

The share of government support to public sector enterprises, according to the latest Budget documents, is projected to increase sharply by 6 percentage points in the current fiscal (2009-10).

This is because profits of public sector units are hit by economic downturn, thus hampering their ability to fund future projects through internal resource generation. Also, an illiquid credit market, characterised by high cost of borrowing, is cited as another reason for the increase in seeking state support.

The major ministries which have suffered a decline in resources are rural development, mines, and communication and IT.

The resources of the ministries of rural development and mines have gone down by around 18 percent each. The Ministry of Communication and IT has registered a decline of around 17 percent. The Ministry of Petroleum and Natural Gas has also suffered a marginal decrease in resources.

The companies that have registered a significant decline in resources are Hindustan Copper Ltd, under the ministry of mines, with a drop of 33 percent; Bharat Sanchar Nigam Ltd, under the communications and IT ministry, with a decline of around 21 percent; and the National Bank for Agriculture and Rural Development with a decline of 18 percent as against last year’s estimates.