FinMin asks central PSUs to pay 30% dividend, issue bonus shares

The capital investment requirements of CPSEs may be kept in view but it needs to be specifically assessed whether those investment requirements can be fully or partly met out of market borrowing, to leverage the favourable debt-equity ratios in the state-owned firms, the statement by economic affairs department said, further stating that the reliance on market borrowing would enforce more professionalism in the CPSEs.

As per the Budget Estimates for 2015-16, the government is estimated to garner Rs 36,000 crore as dividend from public sector entities during the current financial year.

The Fourteenth Finance Commission (FFC) had remarked that unlike operational matters in which the Board and management should have autonomy, transfer to reserves and payment of dividends is a policy matter which the government, as owner, should decide.

“According to FFC, the dividends policy should cater to the requirements of the government also, as it would in case of any prudent investor/owner. This is especially true in times of current fiscal crunch, when the government has to cater to other public interests too,” the ministry’s statement said.

The ministry said there is a huge variation in dividends paid out by the CPSEs and many CPSEs were not adhering to the guidelines. In 2004, the Department of Expenditure had communicated to CPSEs to pay a dividend of 20 per cent on PAT or 20 per cent on equity, whichever is higher. It was 30 per cent for CPSEs in oil, petroleum, chemical and other infrastructure sectors. In absence of clear policy, the 2004 guidelines continued to operate, the statement added.

The government is finding it tough to adhere to fiscal deficit target of 3.9 per cent of GDP in view of likely shortfall in direct tax collections and disinvestment receipts.