Mumbai: The government should overlook political expediencies, instead prioritise its spending to meet the needs of a struggling economy, engineering major Larsen & Toubro said on Wednesday.
The governments are delaying payments, leading to pressure on working capital, the management of the engineering major said, adding it cannot “afford” such a situation.
“The government has to prioritise allocation of funds to projects and contractors and also its vendors. It is very important that the government spend is not confined to political ends, but diverted towards economic ends,” chief financial officer R. Shankar Raman told reporters while announcing the second quarter numbers.
He was replying to a specific question on what can be done to revive the tottering growth.
Mr Raman also pointed out that even though the systemic liquidity is in surplus of over Rs 2 lakh crore, bankers are not lending but clinging on to cash.
“I think there has to be a rediscovery of belief in the credit system. Ships are safest in the harbours, but they are not meant to stay in the harbours.
“Non-performing assets are part and parcel of any credit delivery system and that cannot be allowed to paralyse the flow of money,” he said.
The government should also get the stalled projects started which alone can create over 1 lakh jobs, he said.
L&T’s CEO S.N. Subrah-manyan said, “The government must allocate funds for the right reasons” as government orders account for almost 70 per cent of business for companies like his get as private sector is not investing.
“Given that the government is free of elections now it should get into governance and push projects,” he said.
Mr Raman said the Centre, the states and also state-run enterprises are delaying payments, leading to pressures on working capital for them, and that the usual tendency of getting payments in the second quarter has not been observed this year.
“Unfortunately, our results and our financial health being such, there is a presumption in the system that we can afford (it) and that is something we need to fight...we can’t afford it,” he asserted, speaking of a need in perceptions.
Mr Raman said despite all these, L&T has been honouring payments to all the vendors, roiling its financial performance.
Mr Subrahmanyan pointed out that the government has gone slow on roads projects and the company, which has invested heavily in the sector, needs orders of over `15,000 crore in second half from NHAI to meaningfully sustain its investment.
He also said the ambitious bullet train project is also not going as planned and sought a “push” from the government for the same. As most of the work on the dedicated freight corridors is over, revenue booking from this stream will be hit soon, he said, adding more such mega projects are essential for the economy and companies like his.
As the residential and commercial realty projects are down, L&T has to depend on institutional projects for bagging constriction projects, the CFO said....