Some public sector companies, which are stuck between the devil and the deep sea over the demand for a special dividend even as their bottom lines have taken a hit, may not be willing to toe the government’s line on higher payout. In fact, oil companies may pay lower dividend compared to last year as profit after tax has dipped. Irked by the demand for higher payout, some public sector undertaking (PSU) companies are also demanding a clear-cut policy on the special dividends.
The finance ministry wants higher dividend from PSUs if the government’s disinvestment plan falls short of the targeted R40,000 crore. For instance, the disinvestment of Coal India (CIL) seems unlikely as trade unions have threatened to go on strike over the stake sale. The government has asked for a special dividend if the disinvesment plan fails. According to sources the special dividend is expected to yield about R9,000 crore to the government, which is higher than last year’s record dividend of R8,842.91 crore from the company. The government had originally planned to divest 10% stake in
CIL, but lowered it to 5% due to stiff opposition. The stake sale could have fetched the the government about R9,000 crore.
The finance ministry has also warned that it will not accept any dividend lower than last year’s.
The PSUs feel it would be difficult to pay higher dividend this year as bottom lines have slackened.
“There should be a clear-cut policy on dividend payment by PSUs,” said UD Choubey, director general, standing conference of public sector enterprises (Scope), an industry body.
According to oil secretary Vivek Rae, companies like Indian Oil Corporation (IOC) and Oil India could pay lower dividend this fiscal as compared to the previous financial year as profit after tax are lower this year.
Companies are not ready to even give out special dividends as Power Grid CMD RN Nayak said, “The company does not plan to give special dividend this year.” He expects to pay dividend close to last year’s level, which was R938 crore. The government is also trying to seek higher dividend from PSUs that are sitting on huge cash piles. At the end of the 2012-13, CIL’s cash reserves stood at R63,236 crore, while NMDC’s was at R21,000 crore.
The finance ministry is pushing for higher dividends as some of the planned disinvesment might not fructify, even though a road map for disinvestment in the remaining days of this fiscal has been laid out. The divestments lined up include major PSUs like IOC, Engineers India (EIL), BHEL and Hindustan Aeronautics (HAL).
The finance ministry is planning to go ahead with the stake sale of IOC and EIL this month, while BHEL’s divestment is slated for February. The government also proposes to offload equity in HAL in March. Although the government had planned to raise R40,000 crore from disinvestment of PSUs, it has so far garnered only R3,000 crore from the sale of stake in seven PSUs, including Power Grid Corporation, Hindustan Copper, National Fertilisers and MMTC. Dividend and disinvestment are essential for the government to cap the fiscal deficit at the targeted level of 4.8% of GDP in FY14.