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Govt tells PSUs paying dividend imperative

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Vrishti Beniwal New Delhi
Last Updated : Jan 20 2013 | 2:17 AM IST

Staring at a higher expenditure and slower growth in tax revenue, the Union government is now counting on dividend payment from central public sector units (PSUs) to improve its finances. The finance ministry has written to all administrative ministries to ensure the PSUs under each pay dividends without delay.

Starting the Budget monitoring exercise in the first quarter itself, unlike in the third or fourth quarter as in previous years, the finance ministry has asked all departments to remit their dues correctly. It is monitoring the payouts and has asked departments to strictly adhere to the guidelines, making the payments when due.

By the guidelines, all profit-making PSUs are expected to declare a minimum dividend of 20 per cent of their net profit or equity, whichever is higher.

The minimum dividend payout for companies in petroleum, chemical and other infrastructure sectors is 30 per cent. The Budget Estimate for dividend revenue this year is Rs 42,624 crore, lower than the Revised Estimate of Rs 48,727 crore for 2010-11.

“Dividend payouts would be a substantial source of non-tax revenue for the government, especially at a time when it is trying to restrict its fiscal deficit to 4.6 per cent of the GDP,” said another official.

Many PSUs, however, deviate from the guidelines and pay lower dividend, which affects the government’s non-tax revenue and leads to increase in fiscal deficit. In the absence of interim dividend receipts, the government has to look at other alternatives such as augmenting tax revenues, other non-tax revenues and non-debt capital receipts to achieve the fiscal deficit target.

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The government tax collection target this year looks difficult, especially after the cut in duties on petroleum products. Last Friday, the government had removed the five per cent customs duty on crude oil, brought down the import duty on petrol and diesel from 7.5 per cent to 2.5 per cent and reduced the excise duty on diesel by Rs 2.6 to Rs 2 a litre.

This would knock off Rs 49,000 crore from the gross tax collection target of Rs 9,32,000 crore this year.

The government’s revenue under the ‘dividend and profits’ head has more than doubled from Rs 21,230 crore in 2002-03.

It shot up from Rs 38,607 crore in 2008-09 to Rs 50,248 crore in 2009-10 when the economy was going through a slowdown phase. The government needed dividend income as it was facing a cash crunch in the light of austerity measures taken to come out of the slowdown.

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First Published: Jun 29 2011 | 12:16 AM IST

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