Dividends received from Central PSEs higher than revised estimates for second consecutive year

For the second year in a row, the Centre’s dividend receipts from the public sector enterprises have exceeded the revised estimates. This has been thanks to the pickup in economic activity and rising commodity prices resulting in improving the profitability of public sector undertakings this fiscal year. 

According to the Department of Investment and Public Asset Management (DIPAM) data, dividend receipts from Central public sector enterprises (CPSEs) in the current fiscal stood at ₹49,059 crore as of March 13. The receipts exceeded the government’s revised estimate (RE) of ₹46,000 crore for FY22. The actual dividends received so far this year are 38 per cent higher than ₹35,543 crore received for the full year in pre-Covid FY20. 

In FY21 too, the Centre received ₹ 39,022 crore in dividend receipts from CPSEs, exceeding the revised budget estimate of ₹34,717 crore.

“If you look at the entire structure of CPSEs, most of them make huge profits because of their monopoly position. For instance, ONGC (oil & gas explorer), Power Grid (power transmission), NTPC (energy company), Coal India (single largest coal producing company in the world) all enjoy monopoly in their respective sectors. These companies normally earn ₹ 10,000-20,000 crore in profit every year and also contribute huge dividends to the government,” Madan Sabnavis, Chief Economist at Bank of Baroda, said.

DIPAM shares regular updates on dividend receipt from CPSEs on Twitter. Data compiled from these updates show that the Centre has received at least ₹5,586 crore in dividends from ONGC in the current fiscal followed by Coal India (₹5,094 crore), Power Grid Corporation (₹.4,475 crore), Indian Oil (₹4,363 crore), NTPC (₹3,542 crore), GAIL (₹1,827 crore) and SAIL (₹1,557 crore). 

For the current year, the Centre received ₹1,150 crore in dividend receipts from Bharat Petroleum (BPCL). Besides, the privatisation-bound company also paid ₹6,665 crore in October 2021 as the final dividend for FY21, which included special dividend on account of gains especially on sale of BPCL’s stake in Numaligarh Refinery in March 2021.

Key source of non-tax revenue

Dividends and profits from CPSEs are an important source of non-tax revenue for the Centre. In 2016, the government revised the dividend distribution policy of CPSEs, asking them to pay 30 per cent of post-tax profit or 5 percent of net worth, whichever is higher, as dividend every year. 

In November 2020, DIPAM observed that CPSEs usually consider paying only minimum dividend as per guidelines and advised them to strive paying higher dividends taking into account relevant factors such as profitability, capex requirements with due leveraging, cash/reserves and net worth.

Independent market analyst Ajay Bodke said the government, as the largest shareholder, is well within its rights to ask CPSEs to increase their dividend payouts if the underlying profitability of CPSEs increases massively.  

Metal, mining sectors shine

With a sharp rise in crude, gas and other commodity prices, oil marketing companies (OMCs) and CPSEs in the metals and mining sectors are likely to post super-normal profits and higher dividend payouts this fiscal. The Centre is likely to beat the FY22 budget estimate for PSU dividends of ₹50,028 crore by a comfortable margin. 

For FY23, the Centre has budgeted ₹40,000 crore of dividend receipts from CPSEs.