Gujarat modifies 30% PBT surrender rule for GSPC

The government of Gujarat, which had earlier ordered all its profit-making public sector units (PSUs) to part with 30 per cent of their profit before tax (PBT) for a welfare fund, has made a special provision for Gujarat State Petroleum Corporation (GSPC).

It will suffice, it has said, if GSPC were to extend up to 10 per cent of its profit after tax for corporate social responsibility (CSR) activity.

Earlier, it had asked 13 profit-making PSUs to start paying into a new state-sponsored body called Gujarat Socio Economic Development Society (GSEDS). The directive to contribute 30 per cent of their PBT to GSEDS was issued in September 2008. The move had led to a sharp decline of share prices of listed PSUs.

According to sources, the move on GSPC was taken in the wake of the decision to have a Rs 3,000-3,500 crore public issue of the company’s shares, slated to hit the stock markets next month. And, the government could consider a similar provision for other PSUs as well.

GSPC said in the draft red herring prospectus (DRHP) for its coming public issue that it would carry out welfare activity in the area of its operations only. According to the filing it has done to the Securities and Exchange Board of India, the state government has acceded to its request in this regard.

“GSPC will make contribution for welfare activity in places like Hazira or elsewhere where the company has its operations,” a senior government official privy to the development told Business Standard.

Despite getting majority shareholder approval in the case of listed PSUs such as Gujarat Mineral Development Corporation (GMDC) and Gujarat State Petronet Ltd, the transfers to GSEDS could not take place as eligible projects were not identified, sources said.

“Contributions for GSEDS were to be exempted under Section 35AC of the Income Tax Act and this would reduce the actual impact. GMDC was to contribute about Rs 122 crore to GSEDS for projects approved by the Central Board of Direct Taxes but it could not, as the project has not been identified,” government sources said.

The government could not get the shareholders’ approval in case of Gujarat Alkalies and Chemicals Ltd and Gujarat Natural Fertilisers Corporation.