Facing revenue constraints, Centre looks at PSUs for higher dividends

New Delhi, Oct 20 (SocialNews.XYZ) As the revenues earned by the Central government have dried up, it wants cash-rich public sector undertakings (PSUs) to declare higher dividends this year to reward its shareholders during the ongoing Covid-19 pandemic.

Official sources said PSUs with stock prices higher than the book value and having sufficient cash funds will be asked to shell out higher dividends in Financial Year, (FY)-2021.

With the Central government being the largest shareholder in PSUs, higher dividends would help it to fill its coffers at a time when revenue is constrained due to a fall in economic activity during the Covid-19 pandemic and expenditure has risen sharply.

Dividends from non-financial PSUs have been budgeted at Rs 65,747 crore in FY-2021. Any increase in the dividend will boost the non-tax revenue of the government and help it bridge the rising fiscal deficit which as per initial estimate is now pegged close to eight per cent of GDP.

The Finance Ministry has already asked central public sector enterprises (CPSEs) to complete 75 per cent of their capex for the current fiscal by December 31 this year. Those CPSEs faltering would be asked to share a portion of their unused funds to pay higher special dividend to the Central government or undertake a share buyback.

Finance Minister Nirmala Sitharaman and her predecessors, including the late Arun Jaitley and P. Chidambaram, have maintained the policy of advising non-financial state-owned companies that if they are not utilising their cash reserves for capex needs, they should give it to the Centre through dividends or share buybacks.

As per the guidelines by disinvestment department DIPAM, every CPSE is required to pay a minimum annual dividend of 30 per cent of PAT or 5 per cent of the net worth, whichever is higher.

Source: IANS