International Operations of CPSEs

The Central Public Sector Enterprises (CPSEs) are increasingly into ‘International Trade’ in goods and services, which has a bearing on the Balance of Payments of the country.  During the year 2010-11, as many as 140 CPSEs out of the 220 operating CPSEs either had foreign exchange earnings (FEE) or foreign exchange expenditure(FEE).  As many as 39 CPSEs were net foreign exchange earners.  Out of these 39 CPSEs, 10 CPSEs, namely, ONGC VideshLtd., Air India Ltd., National Aluminium Company Ltd., Airports Authority of India Ltd., Bharat Heavy Electricals Ltd., Shipping corporation of India Ltd., Kudremukh Iron Ore Company Ltd., IRCON International Ltd., Cochin Shipyard Ltd. and RITES Ltd. earned net foreign exchange of more than Rs. 200 crore during 2010-11. 

Foreign Exchange Earnings

15 CPSEs namely, Indian Oil Corporation Ltd., Mangalore Refinery & Petrochemicals Ltd., Bharat Petroleum Corpn. Ltd., Bharat Heavy Electricals Ltd., Air India Ltd., ONGCVidesh Ltd., Hindustan Petroleum Corpn. Ltd., Oil & Natural Gas Corporation Ltd., Shipping Corporation of India Ltd., MMTC Ltd., National Aluminium Company Ltd., Ircon International Ltd., Airports Authority of India Ltd., PEC Ltd. and  Air India Charters Ltd. had gross foreign exchange earnings of more than Rs. 1000 crore, during 2010-11.  Out of these fifteen CPSEs namely, Air India, BHEL, ONGC Videsh, NALCO, SCIL, IRCON International Ltd. and Airport Authority of India Ltd. have been net foreign exchange earners.  Hindustan PetroleumCorpn. Ltd. and PEC Ltd.  have shown reduction in their foreign exchange earnings during 2010-11.  The remaining CPSEs have  had foreign exchange expenditure more than their foreign-exchange earnings.  This is particularly so in the case of Oil Marketing Companies (OMCs).

Sources of Foreign Earnings

Export of goods and merchandise, income from Royalty & Consultancy Services and interest earnings are the major sources of foreign exchange earnings.  Export of merchandise was the major source of foreign exchange earnings in both the years 2009-10 and 2010-11.  Its share in total earnings, however, decreased from 89.08% of the total in 2009-10 to 88.40% of the total in 2010-11.

Foreign Exchange Expenditure

In terms of growth and change in foreign exchange expenditure during 2010-11 over 2009-10 there was a significant increase in foreign expenditure in the case of MMTC Ltd., Handicrafts & Handloom Exports Corporation of India Ltd., GAIL(India) Ltd. and Oil & Natural Gas Corporation Ltd.  In the case of other CPSEs, like MSTC Ltd., ONGC VideshLtd., Shipping Corporation of India Ltd., Power Grid Corporation of India Ltd., Bharat Electronics Ltd. and Rashtriya Chemicals and Fertilizers Ltd., on the other hand, there was a general reduction in the foreign exchange expenditure. 

            There was a big increase in foreign expenditure of Handicrafts & Handloom Exports Corporation of India Ltd. during 2010-11 due to increased trading in bullion.  The Oil Marketing Companies (IOCL, BPCL, MRPL, CPCL, ONGC and GAIL) and others, namely, MMTC, SAIL, BHEL, RINL, SCI, BEL, HHEC, NTPC also incurred increase in gross foreign exchange expenditure during 2010-11.  Import of ‘raw materials’ and ‘capital goods’ have been the major items of  foreign exchange expenditure in both the years. 

            The share of ‘raw materials’/crude oil continued to claim the largest share (around 90%) of gross foreign exchange expenditures in both the years of 2009-10 and 2010-11. Exchange rate fluctuation and change in commodity prices have been also impacting the earnings and expenditures of CPSEs.

International Finance & Investment

Sources of Funds

International finance refers mainly to external commercial borrowings, supplier’s credit, funds raised through the equity market abroad.  Shares of MTNL (ADR) are listed on the New York Stock Exchange and GAIL (GDR) and SAIL(GDR)  are listed on the London Stock Exchange. 

Foreign Investments by CPSEs

Investment comprise off-shore investment by CPSEs through establishment of Indian subsidiaries abroad joint ventures (JVs) and mergers and acquisitions (M&A).  Several CPSEs have set up subsidiaries abroad for marketing their products, procuring raw materials and consolidating their international operations.  ONGC Videsh, in particular, has been successful in acquiring oil and gas assets abroad.  As on March 31, 2011, OVL has participation directly or through wholly owned subsidiaries/joint ventures in 33 exploration and production projects in 14 countries, comprising 9 producing assets, 4 assets under development and 19 exploration assets.  During 2010-11, the company produced 9.45 MMTOE, which accounted for 10.5 per cent of India’s total domestic oil and gas production.  The other CPSEs are following the lead given by OVL in international investments.  SAIL, CIL, RINL, NMDC and NTPC have together formed a JV in International Coal Ventures Pvt. Ltd. for acquisition of coal assets abroad.