Even though dividends paid by public sector undertakings were made part of the mandate when the department was renamed Department of Investment and Public Asset Management from Department of Disinvestment in 2016, the Department of Economic Affairs still has a say because it administers non-tax revenues.
Dividends by public sector units account for nearly 15-20% of the total non-tax revenues of the government. In the past, the Department of Economic Affairs has asked cash-rich public sector companies to pay special dividend to the government to reduce fiscal deficit. “The mandate given to disinvestment department includes management of government investment in PSUs.
There is a thinking in finance ministry that disinvestment department is in a better position to take call on profits and reserves of PSUs and hence, should be made accountable for dividends,” one of the officials told Cogencis. As per the mandate, Department of Investment and Public Asset Management is responsible for decisions related to central public sector undertakings for purposes of government investment in equity like capital restructuring, bonus, dividends, disinvestment of government equity and other related issues.
“At times there are opposing views on surplus available with PSUs as one department believes buyback of shares will be better for the company but the other department may want dividend,” another official said. “Considering disinvestment department is involved in managing government’s equity in such companies and helps them in taking certain key financial decision, even decision regarding dividend should be under the department,” the second official said. While dividend payments by public sector companies are counted as non-tax revenue, buyback of shares gets counted as divestment receipts. In 2018-19 (Apr-Mar), the government raised 107 bln rupees through buybacks, accounting for nearly 17% of the total divestment receipts of 629 bln rupees.
The government has set a target of 657 bln rupees from dividends from public sector enterprises and other investments in 2020-21, up from revised estimate of 483 bln rupees last year. Though discussions are at an initial stage, the dividend from PSUs excluding banks and financial institutions may be brought under the Department of Investment and Public Asset Management, the official said. The government aims to mop-up a record 2.10 trln rupees through divestment in 2020-21.