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Government asks PSUs to clear vendor and contractor dues by October 15

Nirmala Sitharaman, the Finance Minister of India reviewed the capital spending programs with the heads of 32 Maharatna and Navratna Central Public Sector Enterprises (CPSEs) had said that the state-owned companies had been asked to front-load investment for the second half of the current fiscal year (2019). The meeting was a part of the series of consultations of the stakeholders with the finance minister to brainstorm and think of measures that are needed to raise the economic growth of the country, which dropped to a six-year low (5 percent) in the first quarter of the Financial Year 2019-2020.

The government has set a deadline for the Central PSUs as 15th October 2019 to clear all the vendor’s overdue payments exhorted them to front-load capital expenditure as it looks to lift economic growth from a six-year low. By 15th October, the CPSEs have been asked to submit a proper roadmap for the next four quarters, Nirmala Sitharaman said in a statement. "It was decided that all pending dues to be cleared by October 15 and by October 15 they will also have a portal through which all the dealers and contractors shall start monitoring their payment," Sitharaman added. 

The Indian Finance Minister further added, “Meeting (will be held) with the RBI and the finance secretary and selected number of CPSEs to talk about why bank guarantees are becoming a big hitch or hurdle in government paying up the 75 percent post-arbitration awards. If that is the case, I want RBI's help. Also, CPSEs have been asked to detail the lifespan of arbitrations that lock payments after disputes with vendors and contractors.”

It is important to note that stress is being laid on the fact that Capital Expenditure (Capex) should be given a rather vigorous push in the next two quarters. “CPSEs are required to ensure that regular payments are cleared expeditiously as it spurs the investment cycle and establishes the new e-billing portal for enabling the stakeholders to track the status of the payments,'' she said. Special efforts must be made to clear the dues of the MSMEs (Micro, Small and Medium Enterprises) and resolve the cases on the SAMADHAN portal of the Department of MSME of India. 

The Finance Secretary of India, Mr. Rajiv Kumar said in a statement that 34 central Public Sector Undertakings have already spent a total of Rs 48,077 crore till August 2019 and have a detailed plan of spending of another Rs 50,159 crore till December 2019. An additional Rs 54,700 crore would be spent in the January-March quarter of the current financial year. “The expenditure plan is on track and many companies have expressed their willingness to meet the target set for the current fiscal year”, he added.

The Expenditure Secretary of India, Mr. Girish Chandra Murmu said in a statement that the Capital Expenditure (Capex) of all the 244-odd Public Sector Undertakings will be approximately Rs 4 lakh crore for the current fiscal year, which could also eventually go up depending on the requirement. Some private agencies have come to the Indian government for enhancing the gross budgetary support to them and the call in this regard will be taken during the revised estimate meeting to be held soon.” he added.

Also, concerning the pending payments, Mr. Murmu exclaimed, “about Rs 55,000 crore has been cleared out of Rs 60,000 crore as on date.”

Public procurement by PSUs as a percentage of Gross Domestic Product (GDP) in the country has been estimated between 20 to 22 percent. With the Indian economy at USD 2.7 trillion, this amounts to the public procurement to an approximate of USD 500 billion annually. CPSEs (Central Public Sector Enterprises) is a major contributor to the public procurement of various goods and services. The government of India has introduced performance-based evaluation and has also empowered the various boards of Maharatna and Navratna Companies to take the required operational decisions.

The finance ministry has said in a statement that the CPSEs should double their contribution to the gross domestic product (GDP) and become the third major source of revenue for the Centre after the direct and indirect taxes. The CPSEs should also be making efforts to reduce the country's total import bill and expand India's global strategic reach by the year 2022.

To improve transparency, a major transformation has taken place in the last few years in the way procurement is made in the Indian government by setting up the two important portals namely, the Government e-Marketplace (GeM) and the Central Public Procurement Portal. Having this allows easy procurement to take place, also in a completely paperless, cashless and system driven e-market with minimal human interface. 

The participating CPSEs presented their Capital Expenditure until August 2019 to the finance minister of India and explained their complete plans for the next two quarters of the current financial year. For example, ONGC has a Capital expenditure plan of Rs 32,921 crore for 2019-20. It's Capital expenditure until August 2019 was a total of Rs 8,777 crore, which was 26.66 percent of the total planned Capital expenditure for the fiscal year.

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