Internal and Extra Budgetary Resources (IEBR)

Internal and Extra Budgetary Resources (IEBR)

Internal and Extra Budgetary Resources (IEBR) refer to the non-budgetary financial resources mobilised by central public sector enterprises (CPSEs), departmental undertakings, and autonomous bodies for financing their capital expenditure and development activities. Unlike funds directly allocated from the Union Budget, IEBR represents resources raised through internal accruals or external borrowings, supplementing government budgetary support for public investment.
This mechanism plays a crucial role in supporting India’s infrastructure development, social programmes, and public sector growth without exerting additional pressure on the fiscal deficit.

Concept and Meaning

The IEBR framework allows public sector undertakings (PSUs) and government departments to generate and utilise funds outside the Consolidated Fund of India. These resources may be raised through:

  • Internal accruals: Profits retained by PSUs after paying taxes and dividends.
  • Market borrowings: Funds raised by issuing bonds or taking loans from banks, financial institutions, or international agencies.
  • External assistance: Loans or grants obtained from bilateral or multilateral sources (e.g., World Bank, JICA, ADB).
  • Public-private partnerships (PPPs) and other extra-budgetary channels.

Thus, IEBR serves as a supplementary financing mechanism, enabling public sector entities to undertake capital projects that might not be fully funded by the central budget.

Components of IEBR

IEBR consists of two major components:

1. Internal Resources (IR):

These are funds generated by the organisations themselves through internal operations and retained earnings.Examples include:

  • Depreciation reserves
  • Surplus profits after tax
  • Sale of assets or equity disinvestment
  • User charges and service fees

2. Extra Budgetary Resources (EBR):

These include borrowings and funds raised from sources other than the government’s budgetary support.Examples include:

  • Market borrowings through bonds and debentures
  • Loans from banks and financial institutions
  • External commercial borrowings
  • Funds raised under PPP arrangements
  • Special purpose vehicles (SPVs) and government guarantees

Together, Internal and Extra Budgetary Resources enable public sector entities to expand investment capacity beyond annual budget allocations.

Objectives of IEBR

The IEBR framework serves multiple fiscal and developmental objectives:

  • To supplement budgetary resources for capital investment in public infrastructure.
  • To reduce dependence on the Union Budget, thereby helping manage the fiscal deficit.
  • To promote financial autonomy among public enterprises.
  • To accelerate infrastructure creation in sectors such as power, transport, housing, and telecommunications.
  • To leverage private and institutional finance for public development projects.

Institutional Framework

IEBR is implemented mainly through Central Public Sector Enterprises (CPSEs) and select government departments engaged in infrastructure and economic development.
Each year, the NITI Aayog and the Department of Economic Affairs (DEA), in consultation with the concerned ministries, prepare a plan for IEBR mobilisation.

Major Implementing Sectors and Agencies:

  • Ministry of Railways – through Indian Railways Finance Corporation (IRFC).
  • Ministry of Power – through NTPC, NHPC, PFC, REC, etc.
  • Ministry of Petroleum & Natural Gas – through ONGC, GAIL, IOCL, HPCL, BPCL.
  • Ministry of Housing and Urban Affairs – through HUDCO and National Housing Bank.
  • Ministry of Road Transport and Highways – through NHAI.

Process of Budget Estimation

  • Each CPSE or department submits an estimate of its IEBR requirement and mobilisation plan for the coming fiscal year.
  • The estimates are vetted by the Department of Expenditure and incorporated into the Union Budget documents, usually as part of the Expenditure Profile.
  • Although IEBR does not appear as a line item in budgetary expenditure, it is reported separately to provide a comprehensive picture of public investment.

Examples of IEBR in Practice

  1. National Highways Authority of India (NHAI):
    • Raises funds through bonds, loans from multilateral agencies, and PPP models to build highways under Bharatmala Pariyojana.
  2. Indian Railways:
    • Finances major projects through the Indian Railways Finance Corporation (IRFC), which raises funds by issuing taxable and tax-free bonds.
  3. Power Finance Corporation (PFC) and Rural Electrification Corporation (REC):
    • Mobilise funds through domestic and international borrowings to finance electricity distribution and generation projects.
  4. Housing and Urban Development Corporation (HUDCO):
    • Raises long-term funds for urban infrastructure and housing projects.

These entities use IEBR to finance expansion, modernisation, and infrastructure creation without direct budgetary dependence.

Importance of IEBR in Fiscal Management

IEBR has emerged as a significant tool in India’s public finance and infrastructure strategy.

Key Benefits:

  • Augments investment capacity: Enables large-scale public investments beyond the fiscal limits of the Union Budget.
  • Improves fiscal discipline: Reduces the burden on direct budgetary expenditure and fiscal deficit.
  • Enhances efficiency: Encourages public enterprises to generate and manage their own resources.
  • Facilitates infrastructure growth: Enables faster completion of national projects like highways, power plants, and industrial corridors.
  • Leverages private capital: Attracts private and institutional investors through innovative financing mechanisms.

IEBR and Fiscal Deficit Relationship

While IEBR is not part of the government’s budgetary expenditure, it is often included in the overall public sector capital expenditure figures for comprehensive fiscal assessment.
Since it is mobilised outside the Consolidated Fund, it does not directly add to the fiscal deficit, unless backed by sovereign guarantees. However, excessive reliance on government-guaranteed borrowings may create contingent liabilities, indirectly affecting fiscal sustainability.
Thus, the government closely monitors IEBR to maintain a balance between developmental financing and fiscal prudence.

Trends and Performance

Over the years, IEBR has become a major component of India’s total capital outlay.

  • In 2023–24, the estimated IEBR mobilisation by CPSEs was around ₹3.1 lakh crore, complementing the government’s budgetary capital expenditure.
  • The share of IEBR in total public sector investment often exceeds 40–45 per cent, highlighting its growing significance in national development financing.

Challenges in IEBR Implementation

Despite its benefits, the IEBR framework faces several challenges:

  • Delays in project execution leading to lower fund utilisation.
  • Debt servicing pressure on CPSEs due to high borrowing.
  • Weak financial performance of some enterprises limiting internal accruals.
  • Lack of transparency in reporting and monitoring of extra-budgetary borrowings.
  • Risk of contingent liabilities arising from government guarantees.
  • Limited participation from private and institutional investors in certain sectors.

Addressing these challenges requires strong financial discipline, better project appraisal mechanisms, and enhanced public sector accountability.

Reform Measures and Policy Developments

To strengthen IEBR mechanisms, several measures have been initiated:

  • Performance-based monitoring of CPSEs by the Department of Public Enterprises (DPE).
  • NITI Aayog’s emphasis on asset monetisation and capital recycling to reduce borrowing dependence.
  • Integration of IEBR projects with the PM Gati Shakti framework for better coordination and efficiency.
  • Transparency initiatives requiring CPSEs to disclose borrowings and project progress.
  • Promotion of PPP and SPV models to diversify funding sources.

Significance in Infrastructure and Economic Growth

IEBR plays a transformative role in enabling India’s infrastructure-led development model.

  • It supports major national programmes such as Bharatmala, Sagarmala, PM Gati Shakti, National Infrastructure Pipeline (NIP), and Smart Cities Mission.
  • By mobilising non-budgetary resources, it enhances the investment-to-GDP ratio, a critical determinant of long-term economic growth.
Originally written on January 30, 2018 and last modified on October 7, 2025.

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