Coal India will deploy its surplus cash to invest in the eastern freight corridor, build power plants and boost capital expenditure, chairman NC Jha said, responding to a directive from the Prime Minister's Office (PMO), even as oil companies say they are already stretched.

As reported by ET on Monday, the PMO is leaning on state firms, that have combined cash reserves of 1.6 lakh crore, to stimulate the economy with a heavy dose of investments along with share buybacks. The prime minister's principal secretary Pulok Chatterjee has asked state firms, particularly Coal India and Bharat Electronics Ltd, to chip in.

Coal India's cash kitty of about 50,000 crore has caught the imagination of analysts and investors, who want the company to use the cash productively, and the government, which is eyeing the reserves to control the deficit.

Coal India chairman NC Jha said the company was actively considering fresh investment plans such as a joint venture for a thermal power plant near Basundhara mines in Orissa, after ensuring coal movement is streamlined. The company is also interested in the new high-speed railway freight corridor in partnership with the Indian Railways, as advised by the PMO.

"The idea is to utilise the cash so that it does not lie idle in banks," Jha said. Other company officials said Coal India may double its investment target next fiscal, although land acquisition and environmental clearances are a worry.

In contrast, state oil companies have hardly any cash to spare. IOC, BPCL and HPCL are making losses as they are forced to sell fuel below cost without adequate compensation. IOC is actually considering cutting investments next year. Cash-rich firms such as ONGC and Oil India have already committed massive capital expenditures in 2012-13, executives said.

ONGC and its units have plans to invest about 56,000 crore in 2012-13 against existing cash balance of 22,450 crore. Company executives say that there is no scope to step up investments and growing subsidy burden is a matter of concern. ONGC CMD Sudhir Vasudeva said, "The outlay of next year is huge and if our net realisation fell to $50 a barrel, we will barely scrape through out capex requirements."

ONGC's net realisation for selling crude oil was only $53.77 per barrel in 2010-11 after giving $36 a barrel discounts to state refiners for selling diesel, kerosene and cooking gas below market rates.

Similarly, Oil India also has its capex plans ready for utilising cash surplus of Rs 11,700 crore. It plans to spend 10,378 crore in the next financial year.

Source :economictimes.indiatimes.com