Govt may direct cash-rich PSUs to part with cash to meet Rs 40k cr target

To bridge the likely shortfall in the Rs 40,000-crore disinvestment target for this financial year, the government might soon direct cash-rich public sector undertakings (PSUs) to announce special dividends.

The Centre was looking at around Rs 10,000 crore from special dividends, said a Department of Disinvestment (DoD) official. The special dividend would be over and above the dividends state-owned companies pay the government every year.

“The disinvestment target will be met this financial year. We have lined up two large issues of Indian Oil Corporation and Coal India. Other instruments such as buyback and special dividends from cash-rich PSUs are also being explored,” the official said. PSUs sitting on huge cash piles without any immediate capita expenditure plans are likely to be directed to pay the dividend. Currently, Coal India tops the list of cash-rich PSUs, followed by NMDC and ONGC.

“The bulk of the special dividend might come from Coal India. The company is sitting on a huge cash pile, but doesn’t have big capex lined up,” said an investment banker familiar with the government’s disinvestment plans.

As a policy, the highest dividend a PSU can pay in a financial year is capped at 30 per cent of the net profit. However, the policy might be relaxed for special dividends. Last financial year, Coal India, which clocked a consolidated net profit of about Rs 25,000 crore, paid dividend of Rs 7,950 crore to the government. For 2012-13, the government’s total dividend income was about Rs 30,000 crore. This financial year, too, the dividends from PSUs is budgeted at about Rs 30,000 crore.

Source: Business Standard

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