The energy sector’s Central Public Sector Enterprises (CPSEs) are likely to fuel dividend payouts for the full fiscal of FY25 to exceed budget estimates, data trend shows. This could further help the Finance Ministry to keep the fiscal deficit below the Budget estimate of 4.9 per cent.
To date, the government has already got over ₹48,000 crore from CPSEs which is more than 85 per cent of budget estimatesof over ₹56,000 crore. Officials say going by the financial results of CPSEs to date and the growth of three instalments of advance tax, the expectation is that the overall collection of dividends from CPSEs may exceed the actual of 2023-24, which was over ₹63,000 crore. If it happens this would be the second successive year of ₹60,000 crore plus revenue receipt from dividends for the government.
Top contributors
CPSEs belonging to three sectors – oil, coal and power – are expected to continue as top contributors in dividend payout. Oil companies have had a relatively better year this fiscal, as there has been no reduction in petrol and diesel retail prices. At the same time, the removal of windfall levies on export-bound petroleum products are also expected to boost profitability. At the same time, long season of higher temperatures has benefited both power and coal companies.
Dividend policy
Last month the government revised the dividend policy for CPSEs, According to that, It has been stipulated that each CPSE would pay a minimum annual dividend of 30 per cent of Profit After Tax PAT) or 4 per cent of the net worth, whichever is higher subject to the limit, if any, under any extant legal provision. Financial sector CPSES like NBFCs may pay a minimum annual dividend of 30per cent of PAT subject to the limit, if any, under any extant legal provisions.
“The minimum dividend as indicated above is only a minimum benchmark. CPSEs are advised to strive to pay higher dividends taking into account relevant factors such as profitability, capex requirements with due leveraging, cash reserves and net worth”, new guidelines said.
Earlier, a CPSE was required to pay an annual dividend of 30 per cent PAT or 30 per cent of the government’s equity, whichever is higher. However, due account should be taken of cash and free reserves with the CPSE and, accordingly, a special dividend would have to be paid to the government as a return for its equity investments.
According to the Public Enterprises Survey, there are 272 operating CPSEs, out of which 212 reported a net profit of ₹3.43 lakh crore in FY24, which is around 48 per cent higher than ₹2.18 lakh crore during FY23. Dividends declared by operating CPSEs in FY23-24 stood at ₹1.23 lakh crore against ₹1.05 lakh crore in FY23, showing an increase of over 16 per cent. Since there are just 66 CPSEs listed on stock exchanges, entire dividend of large number of CPSEs go to the government only.
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