Bitter dividend pill awaits PSUs as govt to meet today
Santosh Tiwari / New Delhi Jan 12, 2012, 00:15 IST
Ministry jacks up minimum payout to 30% for petroleum, chemical and infrastructure firms.
Cash-rich public sector units may have to pay a minimum dividend of 30 per cent this year. This is against the current norms under which all profit-making state-owned firms are required to declare a minimum 20 per cent dividend on equity or at least 20 per cent of post-tax profits, whichever is higher.
Sources familiar with the developments said the finance ministry had already told the relevant ministries the minimum dividend payout from PSUs in oil & gas, chemicals and other infrastructure sectors would be 30 per cent this year.
The reason is obvious: with just two and a half months left in the financial year and a major slippage on the fiscal deficit front seeming inevitable, the government is looking at cash-rich PSUs and nationalised banks for help in the form of additional dividends.(Click here for graph)
Economic affairs secretary R Gopalan has lined up a series of meetings with the CMDs of PSUs and nationalised banks, and the financial advisers of the ministries concerned this week to ascertain the dividend payout situation for 2011-12. The first such meeting to seek enhanced contribution is slated for tomorrow.
A senior finance ministry official told Business Standard these entities had already been sounded out on the need for additional dividend payouts, and it was time to convince them for the same.
Special dividends from PSUs have also been listed as one of the options in the extended disinvestment strategy, which also includes bulk sales and buybacks as possible modes for government stake sale in CPSEs.
A nod to the strategy was postponed at the Cabinet meeting last week to have more due diligence. Officials indicated it was expected to be cleared soon. Chances are it may be cleared in a Cabinet meeting this week itself, says an official.
Sluggish tax collections, especially on the direct tax front, a growing oil subsidy burden and minimal disinvestment proceeds are set to push the fiscal deficit in 2011-12 to substantially more than the Budget target of 4.6 per cent of GDP.
TIME TO PAY MORE TO THE GOVT
Actual
2009-10
Budget
2010-11
Revised
2010-11
Budget
2011-12
Dividends from *CPSEs and on other investments
21,024.40
23,847.17
25,978.10
23,494.47
Dividend/surplus of RBI, nationalised
banks and financial
institutions
29,223.98
27,461.42
22,748.66
19,129.21
Total
50,248.38
51,308.59
48,726.76
42,623.68
*Central Public Sector EnterprisesSource: Budget 2011-12
The Centre will get a dividend of Rs 3,964 crore from Oil and Natural Gas Corporation. The state-owned explorer, in which the Centre owns 74.14 per cent or 6.34 billion shares, has already informed the Bombay Stock Exchange its board has approved an interim dividend of Rs 6.25 per equity share for 2011-12.
Apropos of the statement (Cash-rich public sector units may have to pay a minimum dividend of 30 per cent this year. This is against the current norms under which all profit-making state-owned firms are required to declare a minimum 20 per cent dividend on equity or at least 20 per cent of post-tax profits, whichever is higher.), can the MCA take the initiative to ensure that the private sector companies follow suit? One of the main reasons for IPO market being sluggish is that their payout ratio is very low or even zero, for years at a stretch.
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