"We have already put (PSUs) on notice, no one will be allowed to fall short of (the) announced intention to
invest... If they have not invested and they still have surplus cash, they have been told to invest...the principle is use it or lose it," he told PTI in an interview.
At the beginning of the financial year, each central PSUs had committed to invest certain amount.
Chidambaram said the performance of CMDs will be measured, among other things, on how much their company has invested in terms of the declared intention.
At present, about 25 central PSUs, including blue chip companies like ONGC, GAIL, NTPC, SAIL, and BHEL have surplus funds worth Rs 2.5 lakh crore.
It is possible that PSUs failing to invest their surplus cash would be required to declare special dividends benefiting the government.
Chidambaram said the performance of PSUs on investment front will be reviewed in January.
Stressing that investment is key to growth, he said there is reluctance among industry to invest because they perceive a number of hurdles to investment and also do not see the economic situation very "propitious or conducive".
"I think some steps we took in September has broken this wave of fear but some part of it is still there," he said, adding the real work is to get the economy going and get the engine of growth started again.
"The answer is to spur investment. Investment is the key to growth. We have to now get down to detail. Get each PSU, each sector, each business house, why are you not investing... invest," he said.