The Silent Beneficiaries of Government Spending

In our special Budget 2012 edition, we pointed out how the Supplementary Grants process to get Parliamentary approval for increased expenditure (beyond budgetary allocations) was often likely to conceal potentially uncomfortable expenditure heads. The reason being, that these expenditure heads are not scrutinised with the same intensity as they would be in the Finance Bill or the Union Budget document. To be fair, most of the figures ought to add up and are reflected in the Revised Estimates.

IndiaSpend’s Dhritiman Gupta looks at one consistent expenditure head - sick or flailing Public Sector Units - in the Supplementary Grants (until the 3^rd Grant tabled on March 19, after the Union Budget 2012) and finds that some interesting information can escape the eye. The larger question of course is where do the funds go? And is there any hope for these sick units? The answer to the first question is that the funds go mostly to repay dues for non-productive heads, including interest and debt repayments. As to whether there is any hope for these units, it seems unlikely considering that only in few cases (companies taken up by the Board for Reconstruction of Public Sector Enterprises or BRPSE) is a serious effort being made to revive the companies.

Following The Money Trail Funds go towards payment of outstanding salaries, conversion of loans and interest into equity and waiver of loans and interests.  A look into the table shows us that Rs55 crore went into clearing outstanding salaries and pensions under the VRS schemes. Loans and interests to the tune of Rs 632 crore were written of for Hooghly Dock and Port Engineering Limited alone. Birsa Stone Lime Company Ltd for instance received Grants-in-aid of Rs137.09 crore to meet its income tax liabilities. British India Corporation received an allowance of Rs37.49 crore to meet its salary dues. The most interesting however is National Film Development Corporation (NFDC), the premier central film developing institute. It has been sick for some time and in fact was in the list prepared by Board for Reconstruction of Public Sector Enterprises (BRPSE). NFDC has received a relief of Rs28.39 crore in the form of conversion of outstanding loans and interest into equity.

Company	Purpose of Grants	Amount (in Rs. Crore)
1st Supplementary Demand for Grants
1)      Hindustan Insecticides Ltd	For carrying out necessary accounting adjustment for waiver of loans	9.48
2)     National Film Development Corporation (NFDC)	Conversion of outstanding interest into equity	8.62
3)     National Film Development Corporation (NFDC)	Conversion of outstanding loan into equity	19.77
4)     British India Corporation	Loans to meet outstanding salaries and wages, statutory dues as per approved revival plan	18.00
2nd Supplementary Demand for Grants
1)      Birsa Stone Lime Company Ltd	Grants-in-aid to subsidiary of Bird Group of Companies to discharge income tax liabilities	137.09
2)     British India Corporation (BIC)	For payment of additional salaries and dues	19.49
3)     National Textile Corporation (NTC)	Refund of Bridge Loan from NTC to BIC towards payment of outstanding salaries	10.96
4)     North Eastern Electric Power Corporation	With respect to Turial Hydroelectric Power project as a part of the restructuring plan	16.13
5)    Hindustan  Dock and Port Engineers ltd	Payment toward VRS Scheme	2.00
3rd Supplementary Demand for Grants
1)      Handloom Sector	Revival and Restructuring	200
2)    HooghlyDock and Port Engineer Ltd	Writing down of outstanding loans (Rs 166.42 cr) and waiver of interest including penal interest (Rs 465.12 cr )	631.54
3)     Hindustan Salts Ltd	Grants-in-aid toward salary	2.12
4)     Film and Television Institute ofIndia(FTII) and Satyajit Ray Film and Television Institute (SRFTI)	Grants	1.39
5)     North Eastern Electric Power Corporation	Loans and advances with respect to Turial Hydroelectric Power project	163.13
6)     North Eastern Electric Power Corporation	For carrying out prior period accounting adjustment for conversion of loan to equity with respect to Ranganadi Hydroelectric power Project	361.10
7)    HindustanDock and Port Engineers Ltd	Grants to meet expenditure toward VRS scheme	2.00

Source: First Supplementary Demand for Grants Second Supplementary Demand for Grants Third Supplementary Demand for Grants Even though one may expect to find the most interesting cases in the Supplementary Demand for Grants it would be quite informative to go through the Budget documents to illustrate how much is set aside for PSU at the beginning of the year and how much is utilised. The following table culled from the Union Budget 2012 also gives a list of companies which received non budgeted help from the centre last year. The interesting fact to take away from the table is that full utilisation of the budgeted amount did not take place in 2011-12. Only a small fraction (Rs64.26 crore of budgeted Rs150 crore) of the amount set aside for revival of sick PSU was utilised. HMT Limited received a package of Rs104.35 crore and Hindustan Cables Limited a package of Rs 44.65 crore.

Heads	Budget 2011-12 (in Rs Cr)	Revised 2011-12 (in Rs Cr)	Budget 2012-13 (in Rs Cr)
Total	855.65	847.13	1,009.67
Lump sum for revival schemes for PSU’s	150	64.26	150
Hindustan Salts Ltd	1.00	3.12	2.00
HMT Limited	-	104.35	-
Hindustan Cables limited	-	44.65	-
Scooters India Limited	-	3.98	-
Triveni Structural Limited	-	1.58	-
Tungabhadra Steel Products limited	-	1.29	-
NEPA Limited	-	15.94	-
Hindustan Paper Corporation limited	-	4.41	-

Source: Union Budget 2012-13 The Budget figures alone do not give us a complete picture of the help being provided to sick PSU’s. Combining them with the figures in the Supplementary Demands for Grants helps us reach a better idea of the quantum and form of help being provided.