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Govt pushes state-run companies to shell out higher dividends amid revenue constraints

The Centre told the (state-owned) firms not to go by the rulebook in paying the bare minimum dividend but to strive to give out more dividends

twitter-logoBusinessToday.In | November 14, 2020 | Updated 14:01 IST
Govt pushes state-run companies to shell out higher dividends amid revenue constraints
As per current norms, PSU firms pay their annual interim dividends in March and February, which is a minimum 30 per cent of profit after tax or 5 per cent of net worth, whichever is higher

Facing a revenue crunch, the government has asked rich state-owned companies to start paying dividends on a quarterly basis. The Department of Investment and Public Asset Management (DIPAM) has issued an advisory on the subject to heads of the state-owned companies on November 9.

The Centre told the (state-owned) firms not to go by the rulebook in paying the bare minimum dividend but to strive to give out more dividends.

Central public sector enterprises, especially those that pay relatively higher dividends, i.e., Rs. 10 per share, may consider paying dividends after quarterly results, according to the advisory, the Business Standard reported.

DIPAM said the move would help the government get predictable and periodic dividends before Budget estimates are firmed up. "The move would also help revive investor interest and improve market sentiment for central public sector enterprises' stocks, as practicability in regular or quarterly dividend payments would attract quality investors to central public sector enterprises' stocks and retain them in the hope of a future dividend," it added.

DIPAM has asked CPSEs to consider forking out at least 90 per cent of the projected annual dividend as interim dividend in one or more installments.

As per current norms, PSU firms pay their annual interim dividends in March and February, which is a minimum 30 per cent of profit after tax or 5 per cent of net worth, whichever is higher.

PSUs paid Rs 43,000 crore in dividends in 2017-18, which were projected to go up to Rs 48,000 crore in 2018-19, according to revised estimates. The government expected Rs 66,000 crore under this head this fiscal year.

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