Govt seeks in­terim div­i­dend, but CPSEs may not oblige

Financial Chronicle - - FRONT PAGE - AN­JANA DAS

THE gov­ern­ment has sought in­terim div­i­dend from prof­it­mak­ing CPSEs to guard against the fis­cal deficit breach in view of a slow­ing econ­omy and slow growth in tax re­ceipts due to GST roll­out. Cash-rich CPSEs such as Coal In­dia, ONGC, NTPC, BPCL, IOC, NTPC, MMTC and NMDC are among the top notch CPSEs which have been sounded out to de­clare in­terim div­i­dend as the gov­ern­ment looks to raise Rs 15,000 crore on­wards from these com­pa­nies to shore up its in­creas­ingly frag­ile fi­nances. The gov­ern­ment will be the big­gest ben­e­fi­ciary of div­i­dend pay­out by CPSEs as it holds a bulk of the eq­uity in these com­pa­nies.

The fi­nance min­istry in a meet­ing with top CPSEs heads last month had in­structed them to in­crease their in­terim div­i­dend, but most of the cen­tral pub­lic sec­tor en­ter­prises (CPSEs) ex­pressed their in­abil­ity to pay back to the prin­ci­pal share­holder due to a slug­gish econ­omy and poor mar­ket con­di­tions. Be­sides, they have also been asked to in­crease their cap­i­tal ex­pen­di­ture plans.

It may be re­called that the Re­serve Bank of In­dia’s (RBI) div­i­dend pay­out to the gov­ern­ment for the year ended June 30, 2017 was Rs 30,659 crore, down from Rs 65,876 crore in the pre­vi­ous year.

All oil mar­ket­ing com­pa­nies — HPCL, BPCL and IOC — had de­clared div­i­dend last fis­cal. In 2016, the gov­ern­ment had come out with a new pol­icy for div­i­dend and is­suance of bonus shares in times of “fis­cal crunch,” wherein it had asked CPSEs to de­clare an an­nual div­i­dend of 30 per cent of profit af­ter tax (PAT) or 30 per cent of the cen­tral gov­ern­ment’s eq­uity, which­ever is higher, as against the ear­lier rate of 20 per cent of PAT or 20 per cent of eq­uity.

In fact, the min­istry has sought from these com­pa­nies a pay­out of 30 per cent on­wards of their pre­vi­ous fis­cal and pro­jected cur­rent fis­cal net profit in div­i­dend, share buy­backs or bonus shares.

Oil ex­plorer ONGC has re­ported a 3.1 per cent rise in its net profit at Rs 5,131 crore for Septem­ber quar­ter this year com­pared with Rs 4,975 crore in the cor­re­spond­ing quar­ter of last year. The board of the com­pany has also ap­proved an in­terim div­i­dend of Rs 3 per eq­uity share of Rs 5, with to­tal pay­out on this ac­count amount­ing to Rs 3,850 crore.

In fact, the gov­ern­ment is of the view that some state-run com­pa­nies should ad­vance an­nounce­ments of in­terim div­i­dend which most of them have not done so far, sources said.

Us­ing the in­terim div­i­dend to cover rev­enue slip­pages and im­prov­ing its fis­cal bal­ances is a very com­mon prac­tice adopted by gov­ern­ments. This time, how­ever, with slow­down and slow growth in prof­its so far, most of the CPSEs have sought ex­emp­tions from an­nounc­ing in­terim div­i­dend.

So far, the gov­ern­ment has raised about Rs 3,1000 crore from the dis­in­vest­ment from the tar­geted Rs 72,500 crore. This year’s fis­cal deficit tar­get is 3.2 per cent and so far the gov­ern­ment has al­ready crossed 91 per cent of this amount with four months still to go for this fis­cal.

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