Centre nearly doubles PSU dividends since 2020, Pg1

Key Highlights:

• Government’s dividend income from non-banking PSUs nearly doubled from ₹39,558 crore (2020–21) to ₹74,017 crore (2024–25).
• Five fuel-based PSUs (Coal India, ONGC, IOC, BPCL, GAIL) contributed ₹1.27 lakh crore, accounting for 42.3% of total PSU dividends since FY21.
• Disinvestment progress has slowed, leading the Centre to prioritise dividends as a consistent revenue source.
• A DIPAM directive in November 2024 mandated PSUs to pay at least 30% of Profit After Tax (PAT) or 4% of net worth as annual dividends.
• CPSEs have been urged to go beyond the minimum threshold, factoring in profitability, capex needs, and reserves.

Detailed Insights:

• The government is strategically using PSU dividends to supplement revenue shortfalls caused by underperformance in disinvestment targets.
• Energy-sector PSUs, due to robust profits, have become pillars of non-tax revenue generation.
• The policy signals a shift from asset monetisation to income maximisation, aligning with fiscal prudence goals.
• Despite falling global crude prices, public fuel prices saw negligible relief, indicating limited pass-through benefits to citizens.
• The November 2024 DIPAM memo institutionalised a performance-linked dividend framework, anchoring fiscal dependency on PSU profitability.
• While aiding budgetary stability, such dividend extraction could undermine capital investment and long-term competitiveness of PSUs.

Key Concepts Involved:

• Profit After Tax (PAT): The company’s earnings after tax, used as a key metric for dividend calculations.
• Dividend: A dividend is a portion of a company's profits that is distributed to its shareholders as a reward for their investment.
• Department of Investment and Public Asset Management: DIPAM is responsible for the government's disinvestment policy, which involves selling off parts of its stake in public sector companies. 
• Disinvestment: Government’s policy of selling its stake in PSUs to raise capital and improve efficiency.