Wednesday, November 6, 2013

Finance ministry asks profit making PSUs to pay at least 30% dividends

IN A bid to mop up more funds to meet fiscal targets during the current financial year, the finance ministry's budget circular for 2014-15 to ministries like power, petroleum, steel, coal and mines has a key instruction. The ministry has instructed these ministries to ask the profit making PSUs under their control to pay a minimum dividend of 30 percent during 2013-14. Under the existing guidelines, ...
the profit making PSUs are required to pay a 20 percent dividend.
The finance ministry directive also said, "in case of PSUs with large disposable profits and healthy cash reserves, higher/special dividends may also be considered" as instructions for a 30 percent payout is only the minimum level of dividend".
The instructions further said, "dividend from PSUs being a return on investment made by the government, should be commensurate with the profits of the company. A lower than reasonable level of dividend would be construed as an implicit subsidy which the government can ill afford, given the level of commitment especially in social sector, and its obligations to meet the fiscal targets."    
Thus, the 14 PSUs in the oil sector, including Oil & Natural Gas Corp, Indian Oil and GAIL India, the ministry has sought a 30 percent dividend.
The finance ministry believes dividend from CPSUs is a return on investment made by the Government and it should be commensurate with profits.
The instructions asked the government nominees on the boards of such CPSUs to ensure that the state-owned firms comply with the dividend guideline for 2013-14.
The ministry said in the case of PSUs with large disposable profits or healthy cash reserves, a higher or special dividend may also be considered, they said.
ONGC, GAIL India and Oil India have declared 30 percent dividend for the last couple of years.

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