Steel PSUs scale up capex plans by 9% after cutbacks in FY17

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Dhirendra TripathiMoneycontrolGovernment-owned steel manufacturers expect to incur almost 9 percent more as capital expenditure in 2017-18 (April-March) after cutting back on the same for the ongoing financial year, according to the Union Budget presented on Wednesday.  There are nine undertakings under the ministry of steel and together they plan to spend Rs 12637.71 crore in 2017-18, higher by nearly 9 percent from the Rs 11604.94 crore they see themselves having spent in the year that ends next month.This comes after the collective 2016-17 capital expenditure plan of the nine companies was reduced by 5.7 percent from its original estimate of Rs 12,308.53 crores to Rs 11,604.94 crore.If one compares the 2017-18 target to the original 2016-17 figure, it is only a 2.7 percent increase in spending that steel PSUs are targeting.To put this in perspective, take the case of Steel Authority of India, the largest steel manufacturer in the public sector. The steelmaker plans to spend Rs 3,500 crore in 2017-18, lower by Rs 500 crores from the expenditure it expects to incur in the ongoing financial year.Now the Rs. 4,000 crore that it is targeting to spend in 2016-17 is itself 33 percent lower from its original aim of Rs 6000 crore that was set in the 2016-17 Budget.The scaling back of plans by SAIL indicates the company could be estimating some over-capacity in the sector and hence a go-slow approach on expansion plans.Rashtriya Ispat Nigam, another public sector undertaking, plans to spend Rs 1,891.65 crore in 2017-18. This is 38 percent more than the 2016-17 revised estimate but only 13 percent more than the original targeted figure of Rs 1,678 crores. The Visakhapatnam-based company cut back its 2016-17 capital expenditure plans by around 18 percent from the original target.