Cash-rich PSUs told to invest aggressively to strengthen the economy: PMO

NEW DELHI: The Prime Minister's Office (PMO) is nudging cash-rich state firms to invest aggressively in 2012-13 and diversify into the infrastructure sector, as it seeks to revive the flagging economy.

The PMO wants to lean on the public sector to stimulate the economy with heavy investments and shrink the fiscal deficit with share buybacks, using their huge cash reserves - 162,000 crore in 17 state companies. It wants to tap public sector undertakings that have cash and bank balance in excess of 1,000 crore and investment plans of above 1,000 crore in 2012-13.

At a meeting chaired by the principal secretary to the prime minister, Pulok Chatterjee, these PSUs were asked to draw up ambitious investment plans or to transfer unused reserves to the government via share buy-backs so as to pare the fiscal deficit.

Chatterjee said public sector investment can provide stimulus to the economy and that it was important for state-run firms that hold significant cash and bank balances to draw up credible investment programmes. "This will help the companies achieve maximum benefits and strengthen the economy," he said.

Coal India, for example, has modest investment proposals for 4,275 crore, less than a tenth of its cash pile of about 50,000 crore. It has been asked to formulate investment plans outside coal in roads, railways, waterways and power - areas where lack of investment has created infrastructure bottlenecks.

BEL, which says it cannot realistically invest more than a third of its 4,500 crore cash and reserves, has been asked to buy back its own shares from the government, to help cut the fiscal deficit.

At the meeting, coal secretary and CMD of Coal India were asked to find ways to advance some of its investments. "If it not possible to significantly step up investment in the coal sector, CIL should actively consider investment in allied sectors which would help the coal sector through improved evacuation and utilisation of coal," said Chatterjee.