Defence PSUs have $8.3 billion of advances, and Defence Ministry wants it for war chest

Defence ministry was allocated a miserable amount in this year’s annual budget, which is why it has decided to unlock a virtual treasure chest of funds that are lying unused in defence public sector units (DPSUs).

As per an internal study, outstanding advances (money given towards the end of the financial year from the capital budget) to these enterprises have risen to $8.3 billion, and is lying unused. While the ministry is looking at ways to utilise these funds, financial managers have also been instructed to review the very system that provides these advance payments.

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As per ET sources, the ministry is also worried about PSUs showing the interest generated from advance payments as profits, rather than making profits from their core area of expertise.

An internal audit suggests that while the total amount outstanding from PSUs is Rs 55,892 crore ($8.3 billion), Hindustan Aeronautics Limited holds the most of it (Rs 51,573 crore), because of getting these advance payments from as early as 1975.

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Managers have also been instructed to clear the outstanding funds till 2000, while new provision for "levy of penal interest if the advances extended to PSUs are not utilised within the given period for the purpose for which it has been released" is under the pipeline.

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It was in the last financial year that the defence ministry had unlocked an unused corpus of $2.3 billion, lying in Indian accounts in the United States. The money was paid as advance payments for purchasing equipment under the foreign military sales pact.

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