PSU dividend targets may be missed due to impact on oil industry

The Centre expects that the target of dividends from non-financial state-owned enterprises (PSUs) could be missed this year. Oil and gas companies contribute a major chunk of PSU dividends. However, they might not be able to pay as much as previous years, or not at all, because of how crude oil prices have impacted them, officials said.

The Budget Estimate for dividends from PSUs is Rs 40,000 crore. So far, the Centre has garnered Rs 15,766 crore. Even with such healthy receipts so far, a shortfall is expected.

“Oil marketing companies have been facing huge under-recoveries due to high-crude prices. The state-owned oil and gas production companies have benefited from prices, but are paying windfall tax. Hence healthy dividends are not expected from them,” a top government official told Business Standard.

“We are expecting a shortfall in PSU dividends,” the official added, but avoided a guess on the shortfall amount. “PSUs are subject to global forces. Because there are so many supply-side bottlenecks, thinking that PSU dividends would be buoyant would be unrealistic,” said D K Srivastava, chief policy advisor at EY India.

Among the other major heads under non-tax receipts and capital receipts, there is a shortfall expected from dividends from state-owned banks and financial institutions and Reserve Bank of India (RBI). This is because the RBI, for its fiscal year ending March 2022 (which will reflect in the Centre’s current fiscal year), transferred Rs 30,307 crore as dividends, much lower than expectations. Last year, the dividend transferred was Rs 99,122 crore, because of which the total proceeds were substantially higher than FY22 BE (see chart).

The total non-tax revenue target for the year is Rs 2.69 trillion, compared with the FY22 revised estimate of Rs 3.14 trillion, and FY22 BE of Rs 2.43 trillion.

On divestment, officials see the FY23 BE of Rs 65,000 crore as a much more achievable figure than in previous years, if things go according to plan, even though Tuhin Kanta Pandey, secretary of Department of Investment and Public Asset Management, is managing expectations. Pandey had told Business Standard in an interview this week that the target was set in February, more than a month before Russia’s invasion of Ukraine and its impact on global markets.

Pandey said while IDBI’s stake sale and Concor's privatisation will be completed only in the next fiscal year, the Centre is counting on the sale of its minority stake in Hindustan Zinc and privatisation of Shipping Corporation to meet the asset-sale target.

At current market capitalisation, the government’s stake in HZL is worth nearly Rs 34,400 crore.

So far this year, the Department of Investment and Public Asset Management (Dipam) has already garnered Rs 24,543.7 crore through offers for sale, initial public offerings (IPOs), and share buybacks. This includes Rs 20,516 crore from the IPO of public sector behemoth LIC.

“Ultimately, the fiscal balance will depend upon buoyancy of tax revenues, and non-tax revenues may not be that big a contributor,” said EY’s Srivastava.