Govt sends out dividend reminder notice to PSUs

Directive timed to coincide with AGM season

The finance ministry is eager to ensure that public sector undertakings (PSUs), including cash-rich oil companies and state-owned banks, cough up the government's share of dividend during a year when their profits are soaring.

It has sent a reminder to the various PSUs' administrative ministries that infrastructure companies, including the oil and power PSUs have to shell out 30 per cent of their equity or net profits "" whichever is higher "" as dividend. All other non-core PSUs have to pay 20 per cent of their equity or net profits as dividend to the government.

Finance ministry officials told Business Standard that dividends and profits from PSUs and banks accounted for almost 25-30 per cent of the total non-tax receipts and constituted an important source of revenue.

"The directive is so timed that it coincides with the annual general meetings (AGMs) of the PSUs and banks. Most PSUs hold their AGMs in June-July and the reminder from the ministry has come just in time," said an official.

Dividends and profits raked in Rs 22,080 crore in the last fiscal, 24 per cent higher than Rs 17,861 crore in 2002-03.

In fact, the proactive role of the finance ministry in ensuring full compliance to the dividend commitments of the PSUs and banks has seen a seven-fold rise in receipts during the last eight years.

The officials said that this particular directive, however, relates only to the regular dividend payable by the PSUs and does not concern interim dividends.

The ministry had last year asked the oil PSUs and banks to pay interim dividends too to shore up its total non-tax revenues.

The government had, almost 10 years ago, fixed the dividend target of 30 per cent and 20 per cent for infrastructure PSUs and all other PSUs, respectively.

The finance ministry, however, was not proactive till 1999-2000 in pushing the administrative ministries to prevail upon their PSUs to honour the dividend commitments.

In the current fiscal, the ministry has sought detailed information including the turnover, net profit and estimated dividend that the PSUs would pay to the government during the year.

"All the oil PSUs have posted huge profits. We just want to ensure that they pay the dividend due to the government too," an official said.

The dividend and profit receipts for the government have posted a healthy growth during the last five years. It has almost trebled from Rs 7,584 crore in 1995-96 to Rs 22,081 crore in the revised estimate for 2003-04.

The ministry has projected the dividends and profits to dip this year to Rs 18,875 crore due to a lower surplus transfer from the Reserve Bank of India. The RBI is expected to pay out less than Rs 5,000 crore this year compared to over Rs 10,000 crore in 2003-04.