The government has reportedly demanded a higher dividend payout of Rs 19,000 crore from state-run oil companies. Meanwhile, the companies cited lower profits so far in the ongoing financial year and government's disinvestment push to oppose the Centre's dividend demand.
The government has asked oil marketing companies to maintain or increase the dividend this year, The Economic Times reported. The Centre is eyeing Rs 19,000 crore in dividend from the oil companies, which is 5 per cent higher than last year, the report added. ONGC and Indian Oil, the two biggest PSU oil companies in India, have been asked to pay 60 per cent of this amount.
ONGC has been asked to pay a dividend of around Rs 6,500 crore, whereas Indian Oil will have to pay Rs 5,500 crore, the daily reported. The government has sought Rs 2,500 crore from BPCL, Rs 2,000 crore from GAIL, Rs 1,500 crore from Oil India and Rs 1,000 crore from Engineers India, it further added.
Company executives told the daily that the demand was steep given the low profits in first half of this fiscal. Notably, all state oil companies, except Engineers India, have posted a decline in half-yearly profits during H1 FY20. Companies fear that a higher outgo in the face of lower profits would interfere with their planned spending or force them to borrow more, raising finance cost. As of now, the oil companies are negotiating with the government for a lower dividend payout, sources told ET.
Some oil companies have resisted the move citing that the government is demanding higher dividends despite reducing its stake. The Modi government has been continuously reducing its stake in public sector undertakings to meet its disinvestment target. Last year, ONGC and Indian Oil had to undertake a share buyback programme worth Rs 9,500 crore in which the state's shares were offloaded. In November last year, the Cabinet approved sale of BPCL while retaining the Numaligarh refinery under a PSU.