The Telegraph
Wednesday , September 12 , 2012
Since 1st March, 1999
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Advice to PSUs on spending

New Delhi, Sept. 11: Finance minister P. Chidambaram has convened a meeting later this week of top PSUs, who together hold cash reserves of Rs 1.8 lakh crore, to make them spend on pending projects.

If a PSU is unable to spend or does not have viable projects, it may be asked to either buy back its own shares or pay special dividends to shareholders. The government as the most important shareholder will be the major beneficiary.

Also under consideration is a proposal to make the PSUs park their spare cash in government securities or even mutual funds.

Firms invited to the meet include ONGC, Coal India, SAIL, Oil India, GAIL, NHPC, Bhel and NMDC. Coal India, ONGC, NMDC and SAIL have the largest reserves among the PSUs.

Coal India is sitting on a cash pile of 43,780 crore, while ONGC holds Rs 22,450 crore. NMDC’s reserves stand at 16,180 crore and SAIL, Rs 13,210 crore.

Coal India and NMDC are likely to feel the pressure most to spend on buyback or government paper as their investment plans for the year — around Rs 5,000 crore for NMDC and Rs 10,000 crore for the coal behemoth — are much lower than their cash balances.

Coal India, SAIL, NMDC and NTPC have already asked their shareholders to approve enabling resolutions for the buyback of shares. Annual general meetings of these firms are expected to be held this month.

Buybacks could allow the government to mop up money to meet its divestment targets without exposing these firms to adverse stock market conditions, which they would have to face if the shares were sold in the open market.

Many PSUs have big plans for investments in the years ahead. SAIL plans to spend over Rs 1 lakh crore by 2020, while Coal India and ONGC want to buy assets abroad.

Earlier this year, ONGC had signed initial deals with ConocoPhillips, China National Petroleum Corp and Mitsui Group to expand abroad.

ConocoPhillips is expected to help ONGC expand into shale gas and deepwater exploration, while China National will jointly bid with it for overseas assets; a deal with Mitsui will pave the way for LNG asset acquisition abroad.

Similarly, Coal India wants to keep money in hand for buys in Mozambique.