Govt pushing PSUs to pay higher dividends

by Psu Connect
Date: 20-11-20

In FY20 there is a fall in payout ration from 70 percent to direct 50 percent in listed PSUs. Now the Government is considering at least 90 percent of the projected annual dividend

New Delhi: The government of India putting pressure on the shoulders of Public Sectors Undertaking or Companies to increase the pay on dividend, the government is asking to distribute the higher dividend and on the quarterly basis even as it has demanded higher share from profits of all its companies.

“The central public sector enterprises, especially those that pay relatively higher dividends (100 percent dividend or Rs 10 per share as the case may be), may consider paying an interim dividend every quarter after quarterly results. Other central public sector enterprises may consider paying interim dividend half-yearly,” the ‘advisory regarding consistent dividend policy by CPSEs’ dated November 9 stated (According to BS).

Data of the previous five years states that the leading PSUs including Oil and Natural Gas Corporation, Indian Oil, NTPC, Poergrid Finance Corporation, Coal India, and NMDC maintained or increased accordingly the dividend pay, despite slow down.

The shortfall of dividend payments is drastic, the 55 listed PSUs cumulatively paid equity dividend worth Rs 2.75 trillion in which the cumulative profit showed of the previous five years is worth Rs 3.85 trillion which shows a percentage of 71.5%.

In FY20 there is a fall in payout ration from 70 percent to direct 50 percent in listed PSUs. Now the Government is considering at least 90 percent of the projected annual dividend.

It has been seen that it has been followed by the private sectors and now to be followed by the public sector peers. Current norms prescribe PSUs to pay a minimum annual dividend of 30 percent of profit after tax or 5 percent of net worth, whichever is higher.

So far, the government collected Rs 4.6 trillion from taxes in the first six months of this fiscal year, 32.6 percent lower than in the same period of 2019-20. PSUs paid Rs 43,000 crore as dividends in 2017-18, which were projected to go up to Rs 48,000 crore in 2018-19, according to revised estimates. The government expected Rs 66,000 crore under this head this fiscal year.

It is obvious if the PSUs are being forced to pay more dividends then the borrowing will automatically increased.