Dividend from public enterprises may decline in coming years
The 15th Finance Commission in its report had raised doubts about the sustainability of higher dividends from CPSEs
The government may find it difficult to meet its ₹50,000 crore dividend target from central public sector enterprises (CPSEs) in FY22 amid its aggressive drive to privatize non-strategic state-owned companies, a senior finance ministry official said.
“ ₹50,000 crore is a very high target. When we disinvest, dividend automatically goes down," the finance ministry official said. In FY21, the government had collected ₹34,717 crore through dividend from various PSUs.
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1 min read . 12:03 AM ISTThe government has set itself an ambitious disinvestment target of ₹1.75 trillion with the privatization of state-led entities such as Bharat Petroleum Corporation Ltd, Shipping Corporation of India and Container Corporation of India Ltd in the pipeline.
However, the finance ministry official said getting nearly ₹35,000 crore through dividend in a pandemic year is very encouraging. “Our follow up with CPSEs has been very strong," he added.
According to a Comptroller and Auditor General of India report presented in the Parliament in February, out of a total dividend of ₹71,857 crore declared by 100 CPSEs for FY19 for all its shareholders including the government, a sum of ₹29,272 crore, representing nearly 40.74% of the dividend, was contributed by 13 oil and gas CPSEs.
The government received a total of ₹36,715 crore dividend during FY19.
The guidelines issued by the Department of Investment and Public Asset Management (Dipam) in May 2016 envisaged that every CPSE would pay a minimum annual dividend of 30% of profit after tax or 5% of the net worth, whichever is higher.
“It has, however, been observed that many CPSEs usually consider only paying minimum dividend as per guidelines. CPSEs are advised to strive paying higher dividends taking into account relevant factors like profitability, capex requirements with due leveraging, cash/reserves and net worth," Dipam said in its advisory issued in November, 2020.
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Dipam had also advised CPSEs to pay quarterly or at least half-yearly dividends instead of paying all the dividends at end of the financial year.
“A predictable and staggered dividend regime would enable CPSEs to avoid end-loading of annual payments by freeing up resources payable during the last quarter. A consistent dividend policy would also help revive investor interest and improve market sentiment for CPSE stocks. Government would also get predictable and periodic dividends as interim dividends before the budget estimate is firmed up," it added.
Dividends and surpluses from the Reserve Bank of India (RBI) and CPSEs, and receipts from the auction of telecom spectrum constitute the largest source of non-tax revenues of the Union government.
The 15th Finance Commission in its report also raised doubts about the sustainability of higher dividends from CPSEs.
“In a growing economy, non-tax revenue, especially of dividends and profits, can be reasonably expected to keep pace with the gross domestic product (GDP) growth. But collections from some major sources have shrunk in recent years. The receipts from spectrum auctions are likely to improve as the overall telecom sector scenario improves gradually and auctions gain momentum. Likely divestment of shares of public sector enterprises (PSEs) will affect the sustainability of the dividends and profits from these enterprises," it added.
A query sent to the finance ministry remained unanswered till the time of going to the press.
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