Government to amend CPSE capital restructuring guidelines for dividend payment

The government is planning to amend its 2016 guidelines about dividend payment, bonus issues and share buyback by CPSEs, officials said.

The Finance Ministry issued comprehensive guidelines on 'Capital Restructuring of Central Public Sector Enterprises (CPSEs)' in May 2016 to efficiently manage government investment in CPSEs. The ministry is expected to issue amended guidelines this month.

As per the capital restructuring guidelines issued, CPSEs that do not have plans to deploy their capital optimally for business purposes should have a professional look at the surplus funds available to them.

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As per the guidelines issued by the Department of Investment and Public Asset Management (DIPAM) in May 2016, every CPSE is required to pay a minimum annual dividend of 30 percent of PAT or 5 percent of the net worth, Also, every CPSE having net worth of at least Rs 2,000 crore and cash and bank balance of over Rs 1,000 crore were required to opt for share buyback.

The guidelines aim to ensure that state-owned enterprises with large cash reserves pay dividends, thereby maintaining investor interest in the company's stock.

The combined market capitalization of CPSEs, banks, and insurance companies has grown over 500 percent in the past three years from Rs 15 lakh crore to over Rs 58 lakh crore.

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In the current fiscal year, the government has budgeted to collect Rs 56,260 crore as dividend from public sector enterprises, up from Rs 50,000 crore in 2023-24 fiscal.

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