To boost Central Public Sector Enterprises (CPSEs) capital expenditure (CAPEX) in India several strategies can be implemented....

 To boost Central Public Sector Enterprises (CPSEs) capital expenditure (CAPEX) in India, leveraging low borrowing costs and addressing unemployment, several strategies can be implemented. These include encouraging CPSEs to raise capital independently through financial instruments like bonds, enhancing transparency in PLI schemes, and promoting digital transformation to improve efficiency. Additionally, focusing on restructuring weak CPSEs and leveraging their net-worth can also be effective.

1. Independent Capital Raising:

Leverage Low Borrowing Costs:

Encourage CPSEs to tap into low-cost funding avenues like bonds, external commercial borrowings (ECBs), and partnerships with private players. This reduces their reliance on government budgetary support.

Revive IEBR Financing:

The Indian government can incentivize CPSEs to revive their own borrowing practices (Internal and External Borrowing) to finance their capex, making them less dependent on the budget.

2. Enhance Transparency and Timeliness:

PLI Schemes: Improve the transparency and timeliness of disbursements under Production Linked Incentive (PLI) schemes. This could involve streamlining the application process, ensuring timely approvals, and improving the overall transparency of the scheme's impact.

3. Promote Digital Transformation:

Operational Efficiency: Integrate advanced digital infrastructure and automation in sectors like railways, power, and telecom to reduce operational costs and improve overall efficiency.

4. Restructuring and Leverage Net-worth:

Restructuring CPSEs:

Focus on restructuring weaker CPSEs to improve their financial health and make them more attractive to investors. This could involve streamlining operations, reducing debt, and improving management.

Greater Leveraging of Net-worth:

CPSEs can utilize their net-worth to raise capital for capex projects, reducing reliance on government funding.

5. Address Unemployment:

Job Creation: CPSE capex projects can contribute to job creation, helping address unemployment. This could involve focusing on projects that have high employment potential, such as infrastructure development and manufacturing.

6. Disinvestment and Asset Monetization:

Disinvestment of Non-Strategic CPSEs:

Privatize non-strategic CPSEs to attract private investment, reduce the fiscal burden on the government, and generate resources for capex.

Asset Monetization:

Explore opportunities for monetizing CPSE assets through mechanisms like infrastructure investment trusts (InvITs) and real estate investment trusts (REITs) to de-risk private investments.

7. Financial Policies and Guidelines:

MoU Framework:

Review and refine the Memorandum of Understanding (MoU) framework for CPSE performance evaluation to ensure that capex targets are aligned with overall strategic objectives.

CPSE Performance Reviews:

Limit CPSE performance reviews to a frequency that allows for effective monitoring and evaluation while minimizing bureaucratic hurdles.

Example: If a CPSE needs ₹100 crore for a new project, it can explore options like:

Borrowing through Bonds:

Issue bonds with a low interest rate (e.g., 5%) to raise ₹100 crore. The annual interest payment would be ₹5 crore, and the principal would be repaid over a specified period.

PLI Incentives:

Apply for PLI schemes that offer incentives based on their capex investments. If they qualify, they may receive a significant portion of the investment back as a subsidy, reducing the overall cost.

Digital Transformation:

Implement digital solutions to streamline operations, leading to cost savings that can be reinvested in capex.

Asset Monetization:

Consider using InvITs to monetize a portion of their existing assets, freeing up capital for new projects.

Worldwide Examples of Government Initiatives to Increase Capital Expenditure:

1. Public-Private Partnerships (PPPs):

Many governments, including those in the UK, Australia, and other developed nations, have successfully used PPPs to finance large infrastructure projects, sharing the risks and rewards between public and private entities.

2. Targeted Infrastructure Spending:

Governments often identify specific infrastructure projects, like roads, bridges, and public transport, and allocate significant funding to them. This can be done through budgetary allocations, tax incentives, or by creating special purpose vehicles.

3. Infrastructure Funds:

Some countries have established dedicated infrastructure funds to mobilize private investment and boost Capex. These funds may offer equity, loans, or guarantees to private companies participating in infrastructure projects.

4. Fiscal Stimulus:

Governments may use fiscal stimulus packages during economic downturns to increase public investment in infrastructure. This can create jobs and stimulate economic activity.

5. Tax Incentives:

Similar to India, many countries offer tax incentives to encourage businesses to invest in new assets or infrastructure. These incentives may include tax deductions, credits, or accelerated depreciation.

To boost CPSE capital expenditure (Capex) in India, leveraging low borrowing costs, governments can increase budgetary support, offer tax incentives for CPSEs, and encourage them to issue debt instruments like bonds. Internationally, governments use similar approaches, including public-private partnerships and targeted infrastructure spending initiatives. By implementing these strategies and utilizing the low borrowing costs effectively, the government can drive a significant increase in CPSE Capex, boosting economic growth and infrastructure development in India.