Grappling with a tough fiscal deficit target of 4.1 per cent of gross domestic product (GDP), amid an expected tax revenue shortfall of Rs 1.05 lakh crore, Finance Minister Arun Jaitley might look at higher dividend from public sector undertakings (PSUs) compared to last year. This is apart from the government eyeing deep Budget cuts across ministries and departments. Multiple sources told Business Standard Jaitley was likely to ask PSU chiefs to use their cash piles to either boost public investment or partly offset the expected shortfall in tax receipts. According to guidelines set by the Department of Public Enterprises, all profit-making PSUs have to declare dividend payout of at least 20 per cent of their profit after tax (PAT); profit-making PSUs in the energy and infrastructure segments declare dividend of 30 per cent of PAT. All profit-making joint-venture companies in which the Centre holds stake have to pay dividend of 20 per cent on the government’s equity holding. In practice, however, PSUs end up paying higher dividend. Former finance minister P Chidambaram had exerted pressure on major PSUs to give higher special dividend to the Centre. In 2013-14, as he set about meeting a fiscal deficit target of 4.8 per cent of GDP, while his disinvestment plan was floundering and tax revenue falling short, the expected proceeds from PSU dividend were scaled up 44 per cent — from Rs 29,870.12 crore to Rs 43,074.58 crore. He had directed Coal India to announce a special dividend payout of Rs 18,317.46 crore, its highest. Of this, Rs 16,485 crore went to the government. The government had also earned Rs 3,100 crore as dividend distribution tax from the company. As reported earlier, at the end of March this year, 54 major listed central government enterprises were sitting on cash and cash equivalent of Rs 2 lakh crore, unchanged from a year earlier. The amount is about a fifth of the cumulative investment in fixed assets by these companies. The bulk of this cash lies in bank deposits, which earns little as interest. Coal India accounts for about a quarter of this cash pile. In the past, the company has paid dividend of as high as 81 per cent of PAT. This year, while Budget planners are enforcing cuts across government departments, they are also looking at alternatives. “At this stage, we feel confident we can meet it (the fiscal deficit target) with expenditure cuts.
If that's not possible, we will look at other measures,” Chief Economic Advisor Arvind Subramanian had said in an interview with Doordarshan last week. “Other measures" could include higher proceeds from disinvestment, telecom spectrum sales and PSU dividend. However, with just three months left this financial year, ramping up the disinvestment drive at a time when just one company has been divested so far seems a big ask. Also, officials say Budget planners cannot depend on blockbuster spectrum sales. As such, banking on PSUs to pay special dividend seems the only option.
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