NEW DELHI: At a time when the government is hard pressed to push economic growth, investment growth by its leading listed companies will be flat in 2012-13, as against a 35 per cent increase in the current year.
Analysis of combined investment outlay by six sector leaders — Oil and Natural Gas Corporation, Coal India, NTPC, Indian Oil Corporation, Power Grid and Steel Authority of India — point to a slowing of investment. All these fund expansion from internal resources. In 2011-12, their combined investment towards capital expenditure projects is estimated at Rs 111,359 crore, according to the revised estimates, implying an increase of 35 per cent over 2010-11.
However, the Budget estimate for investment by these companies, at Rs 110,094 crore for 2012-13, is a marginal drop over the current year’s revised estimate. Budget estimates are presented by the government to Parliament on behalf of its companies, usually before the beginning of the financial year, in the form of the Expenditure Budget. The numbers are revised in the subsequent budget, which also gives the actual spending of the year earlier.
Experts attribute the flat investment outlay to high interest rates. “There has been a general slowdown in investment from a peak of 38 per cent of GDP in 2007-08 to 32 per cent in 2010-11. There is a decline in the current financial year, too. The overall investment climate has deteriorated due to the combined impact of high interest rates and global economic slowdown,” said Rajat Kathuria, a consultant with Icrier. Madan Sabnavis, chief economist at CARE Ratings, agrees that rising interest rates are the reason.
Last week Kaushik Basu, chief economic advisor in the finance ministry, pointed to a further slowing in the investment and savings rates.
Oil and Natural Gas Corporation (ONGC), along with its overseas arm, ONGC Videsh, plans to invest Rs 40,900 crore in the next financial year in exploration and production of oil and gas, a marginal increase over the capital expenditure of Rs 39,934 crore in 2011-12. The 2011-12 capex was a 17 per cent increase from 2010-11.
Indian Oil Corporation (IOC) has scaled down its capex for 2012-13 to Rs 10,000 crore, as against a spending of Rs 11,000 crore in the current year. Next year’s spending includes Rs 8,900 crore on its core refining and marketing business and Rs 650 crore in oil and gas exploration. The remaining Rs 450 crore would be spent on the petrochemicals business.
The tightening of spending is more disturbing in the power sector, with NTPC, the largest generator, spending about 20 per cent down in the financial year 2012-13. Its counterpart in the transmission business, Power Grid, also the biggest transmission utility, would see an increase in investment.
CoalIndia, that had figured in news through the year for fall in production, spent Rs 4,275 crore and plans to spend almost the same next year, at Rs 4,195 crore. The investment will be made to develop rail infrastructure, equipment procurement and project implementation. Steel maker SAIL’s investment outlay for 2012-13 is Rs 14,500 crore, up nearly 15 per cent from the current year. Its main investments will be at its plants in Bhilai and Rourkela and the IISCO plant at Burnpur.