PSU cash reserves can cut fiscal deficit by Rs 20,000 cr: CRISIL

Ratings agency says cash reserves of top 20 PSUs could become alternative source of income to meet the disinvestment target of Rs 40,000 cr this financial year

Mumbai-based research and ratings agency, CRISIL has estimated the government can cut its fiscal deficit by Rs 20,000 crore in the current financial year by using cash reserves of top 20 public sector undertakings (PSUs).

The state-owned companies are likely to have a pre-dividend corpus of Rs 1,60,000 crore at the end of March 2014.

The PSUs can easily pay special dividends worth Rs 27,000 crore, in addition to their individual dividend payouts without any impact on capital expenditure plans.

The public sector undertakings considered for this report include Bharat Electronics, Bharat Heavy Electronics, Bharat Petroleum Corp, Coal India, Container Corporation, Engineers India, Gail, MMTC, MOIL, Nalco, Neyveli Lignite Corp, NHPC, NMDC, NTPC Ltd, Oil India, Oil and Natural Gas Corporation, Power Grid Corporation, Shipping Corporation, SJVNL, and Sail.   

With the tax revenue collections falling short of the target, the Centre might find it difficult to meet its disinvestment target of Rs 40,000 crore this financial year.

Mukesh Agarwal, President, CRISIL Research, said: “In such a scenario, the cash reserves of PSUs provide an alternative source of income. However, a lot will depend on whether the government is able to convince the companies to part with the surplus cash as a special dividend.”

The total cash holding with the 20 public sector undertakings was Rs 1,70,000 crore at the end of March 2013, while their pre-dividend corpus is expected to be around Rs 1,60,000 crore by March 2014.    

According to CRISIL, the companies can distribute 40 per cent of the corpus as dividend without impacting growth plans.

This would be Rs 27,000 crore more than the Rs 37,000-crore dividend paid by these companies last financial year. So, the excess payout to the government could be Rs 20,000 crore, of the extra Rs 27,000 crore.

Without incorporating the extra dividends, the current year’s fiscal deficit could land at 5.2 per cent of gross domestic product, CRISIL says.

The Rs 20,000 crore additional income would approximate 20 basis points of the fiscal deficit, which could help the government reach closer to its stated fiscal deficit target of 4.8 per cent.