Investors cheer as govt compels PSUs to pay dividends before FY17 ends

Government had been pressurising the oil-marketing companies in the country to pay dividends as early as possible.

On March 23, the oil marketing companies like Hindustan Petroleum Corporation Limited (HPCL), Bharat Petroleum Corporation Limited (BPCL) and Indian Oil Corporation Limited (IOCL) declared their second interim dividend before the financial year 2017 ends worth Rs 4570 cr.

Taking the cue, Coal India has also planned its board meet on March 27 to declare second interim dividend. The board of the company had approved the dividend of Rs 18.75 per share on March 6, 2017.

Hindustan Zinc Limited was in the limelight few days back on giving maximum dividend in the history of corporates for the last financial year which stands at Rs 27,157 cr. The centre holds 29.54 per cent stake in the company which results in hefty dividend received by the centre of Rs 11259 cr.

The four public sector enterprises had to get the approval from the market regulator, Securities and Exchange Board of India (SEBI) to relax the existing terms and conditions of seven days’ time gap for dividend payout.

The government’s pressure to give maximum dividends left the PSUs with decline in their cash reserves. The cash balance at non-bank public enterprises plunged by 20% in the first half of this financial year.

The rising fiscal deficit projections for 2016-17 is forcing the government to pressurise the public sectors for heavy dividend pay outs so that the government can manage the fiscal deficit.

The seventh pay commission recommendations and shortfall in direct tax collections are the major reasons for the rising fiscal deficit of the government. Therefore, to increase the revenue, government is taking the routes such as disinvestments, cutting subsidies, receiving massive dividends from PSUs and the cash received from the share buybacks by PSUs.