NSSF to invest more in public agencies than govt in FY19

Fund to explore providing loans to railways, urban housing scheme

The National Small Savings Fund (NSSF) has a budget to invest ~1.3 trillion in public agencies in the next financial year (2018-19, or FY19). This is the first time its annual investment in public agencies would exceed that in general government (Centre and states) debt, pegged at a little less than ~1 trillion in FY19.

In addition to funding public agencies such as the Food Corporation of India (FCI), the National Highways Authority of India (NHAI), and Air India, the NSSF might also invest in agencies such as Indian Railways Finance Corporation and the Pradhan Mantri Awas Yojana (Urban).

Separately, with the fund getting strong inflows, its interest outgo could well exceed ~1 trillion in the coming years.

NSSF routinely accepts money through instruments such as post office savings accounts, savings certificates, and public provident fund. In 2018-19 (BE), the fund expects incremental flows through these three channels to touch ~1.4 trillion, up from ~1.17 trillion in 2016-17. This amount was typically invested in government securities — both Centre and states. But in 2016, the government approved the exclusion of all state governments with the exception of Arunachal Pradesh, Delhi, Karnataka, and Madhya Pradesh from NSSF investments. As a consequence, the fund is increasingly looking at investing in public agencies owned by the central government.

According to the Budget documents, in 2017-18 (RE), its total investment in public agencies is expected to touch ~1.06 trillion, marginally lower than the ~1.19 trillion it invested in government debt. This amount was invested in FCI, NHAI, Air India, and other agencies.

In 2016, the government approved a one-time loan of ~450 billion from the NSSF to the FCI, stating that the repayment obligation would be treated as the first charge on the food subsidy released. But, the budget documents show that the NSSF actually lent ~700 billion to the FCI in 2016-17, about 55 per cent more than what was originally planned. Further, rather than being a

one-time loan, it subsequently invested another ~250 billion in 2017-18. With the FCI repaying ~140 billion during the year, this takes the total outstanding loans to ~810 billion. It has also invested ~200 billion in the NHAI and another ~30 billion in Air India.

Another ~587 billion is expected to be invested in other public agencies in FY18.

Officials said the fund was looking to invest ~100 billion in IRFC and ~80 billion in the PMAY (Urban).

Now, this additional investment in other public agencies (excluding FCI, NHAI and Air India) is expected to be ramped up to ~1.3 trillion in 2018-19. By comparison, its total investment in general government debt (centre and states) is pegged at ~996 billion in the next financial year. But there is little clarity on where this money will be invested as yet.

On the issue of its interest obligations, the Budget has projected the NSSF’s interest payments at ~954 billion in FY19, up 4.5 per cent from ~912 billion in FY18. It had soared 17 per cent in FY18, up from ~782 billion in FY17.

Assuming the same growth in interest payments, outgo would jump to ~997 billion in FY19.

Of the three channels through which it receives funds, the interest outgo on savings certificates has seen the biggest jump. In 201718, the interest payment on savings certificates stood at ~270 billion, up 45 per cent from ~186 billion the previous year.

By comparison, the interest payment on public provident fund grew by 17 per cent in FY18 (revised estimate), while that on savings deposit grew by 3.5 per cent.