Surplus cash: PSUs may get more attractive avenues to invest

Shishir Sinha
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A Government appointed committee is of the view that public sector undertakings (PSUs) should be allowed to park their temporary cash surplus funds in Government securities and various mutual funds besides others.

It has also advocated allowing PSUs to seek quotations from the banks for placing bulk deposits.

A committee under the chairmanship of Shaktikanta Das, Additional Secretary (Economic Affairs) in the Finance Ministry, is all set to give its report this month.

The committee’s report will set the tone for more judicious use of over Rs 1.5 lakh crore cash surplus that the various PSUs have.

Safe investment

“It is envisaged to provide safe, best return and virtually risk-free environment for temporary cash surplus. At the same time, it will be ensured that the regular investment plans of the PSU do not get disturbed,” a person familiar with the development told Business Line. The effort will be not to disturb investments that are already planned.

At present, the Department of Public Enterprises (DPEs) has many guidelines in place regarding investment of surplus funds by PSUs.

The summary of these guidelines is that at least to 60 per cent of the surplus can be placed with public sector banks, up to 30 per cent with public sector mutual funds and the rest in other instruments.

But PSUs usually keep maximum funds only with banks as guidelines for various other instruments are complex in nature.

The committee is likely to go against the directive of the Department of Financial Services in terms of bulk deposits.

This department, in its letter on July 18, had asked the Department of Public Enterprises to instruct PSUs not to invite competitive bids for placing bulk deposits.

However, the committee feels that PSUs should be allowed to seek quotations from the banks to place their funds.

“Such a move will give better returns for larger part of money as PSUs have less freedom than the private sector in choosing instruments for deployment of surplus funds,” the person added.

He also said that more judicious use of surplus funds will not only help the companies to earn better returns, but also to stimulate sectors such as infrastructure.

The issue of the use of surplus funds by PSUs got prominence after the Principal Secretary reviewed investment plans of PSUs which hold cash and bank balance in excess of Rs 1,000 crore and have investment plans in 2012-13 of more than Rs 1,000 crore.

(This article was published on September 2, 2012)
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