The Telegraph
Since 1st March, 1999
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Dividend bridge over selloff gulf

Mumbai, Oct. 7: The government is counting on a dividend deluge to weather the turbulent divestment waters.

Profit-making public sector companies will soon spoon out generous dividends to help the exchequer paper over a fiscal deficit that is seen to widen as its firms on the block cannot be sold without Parliament’s approval.

Already, Oil & Natural Gas Corporation (ONGC) and Shipping Corporation of India (SCI) have announced handsome dividends. ONGC’s dividend for the last financial year was recently approved by its shareholders. The firm will pay the government, its main owner, Rs 30 on every share with a face value of Rs 10. The staggering 300 per cent pay-out will leave the government richer by more than Rs 3,570 crore.

“High dividends from PSUs are on the cards this year,” says Arun Kejriwal of Kejriwal Research and Investment Services. “But unlike last year, there will be fewer PSU companies declaring special dividends.”

ONGC, the oil exploration major with a newly-acquired refinery under its belt and oilfields from Mumbai to Sudan to Iraq, has a paid-up capital of Rs 1,42,593 crore, 84.11 per cent of which is with the government

The government owns 80.12 per cent of SCI’s Rs 28,230-crore equity. The special dividend announced last week will give the government a sum of Rs 2,422.5 crore.

A similar payment by Engineers India is also on the cards before the PSU is divested. The amount could be around Rs 50 on shares with a face-value of Rs 10 each.

Kejriwal says the more profitable PSUs have been generous for some years. They pay almost 30 per cent of their earned profits; private companies fork out 15-40 per cent.

The government has budgeted around Rs 13,000 crore as the proceeds to be raised from privatisation. With the recent Supreme Court ruling that divestment of these companies must be carried out after the approval of Parliament, their sale has been thrown into limbo. The government lacks majority in the Rajya Sabha, where the most trenchant critics of selloff hold sway.

The shortfall in revenue from privatisation will not be as disturbing because there are a number of profitable state-owned firms. A JM Morgan Stanley report in 2001-02 said the Centre pocketed Rs 6,970 crore as dividends.

That amount jumped to Rs 9,900 crore in 2002-03, an increase of more than 40 per cent than what was given out in the previous year. Even if the dividend were to be raised to 80 per cent, the report says PSUs can pay an annual dividend of Rs 23,000 crore. This would be higher than the divestment target fixed for the current financial year.

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