[Answered] Although the government has increased the budgetary allocation for Public Sector, but their contribution to capital outlay is not increasing. Discuss.

Introduction: Contextual introduction.
Body: Explain budgetary allocation for Public Sector and their contribution.
Conclusion: Write a way forward.

The Union Budget is also known as the Annual Financial StatementArticle 112 of the Constitution of India lays down that it is a statement of the estimated expenditure and receipts of the Government for a particular year. The vision for the Amrit Kaal includes technology-driven and knowledge-based economy with strong public finances, and a robust financial sector.

Budgetary allocation:

  • The budget for 2023-24 has been generous with its capital expenditure. A large chunk of its capital outlay would be routed through capital support to PSUs. For instance, in 2022-23, PSUs accounted for over half of the government’s capital expenditure, up from a share of 42% in 2021-22.
  • In 2023-24, Railways would be helped by Rs 2.4 trillion of capital support from the Centre.

Contribution of Public sector:

  • There is a decline in the share of the PSUs’ own contribution to their total capital outlay on projects. Hence, PSUs are increasingly becoming more dependent on the Centre to meet their capital expenditure requirements.
  • Railways’ own contribution to its capital projects will decline to 18%.
  • There is also a lack of accountability in ensuring a decent return on such investment.
  • The losses prompt PSUs to take loans from the Banks which they cannot repay creating the conditions of the twin balance sheet.
  • So many PSUs are in loss. Out of these, state-run carrier Air India, telecom companies Bharat Sanchar Nigam Ltd (BSNL) and Mahanagar Telephone Nigam Ltd (MTNL) were the top three loss-making PSUs in fiscal 2018-19.

Overall, the government must expedite its plan for asset sale and privatisation. The holding structure of PSUs needs to be reworked, and there are best practices available, like Singapore’s Temasek model.


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