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Union Leaders Agree To Disagree as Government asks PSUs for quarterly dividend payouts, higher share of profits

DIPAM has prepared a 'consistent' dividend policy for state-owned firms to follow

Posted : 15 November, 2020
Author : Vivek Avasthi
Union Leaders Agree To Disagree as Government asks PSUs for quarterly dividend payouts, higher share of profits

Staring at a revenue crunch, the government has asked rich Public Sector Undertakings to start paying dividends on a quarterly basis and has demanded higher share from profits of all PSUs.. Aiming for a ‘predictable and staggered’ dividend regime, the government told the state-owned firms to not go by the rulebook in paying the bare minimum dividend but to strive for giving out more dividends.

“The central public sector enterprises, especially those that pay relatively higher dividends (100 per cent dividend or Rs 10 per share as the case may be), may consider paying interim dividend every quarter after quarterly results. Other central public sector enterprises may consider paying interim dividend half-yearly,” the ‘advisory regarding consistent dividend policy by CPSEs’.

The communiqué, sent by the department of investment and public asset management (DIPAM) to the heads of all PSUs, said the move would help the government to get predictable and periodic dividends before Budget estimates are firmed up. All state-owned firms should consider paying at least 90 per cent of the projected annual dividend, in one or more installments as interim dividend, DIPAM said.

Most state-owned companies pay the year’s interim dividend in February or March. “Such bunching of interim dividend payouts in February-March may compete with their cash availability for year-end payments to suppliers as well as towards advance tax,” the DIPAM advisory stated.

Thomas Franco, Former General Secretary of All India Bank Officers' Confederation (AIBOC) says "It shows that the Government has become bankrupt. It all started with demonetisation. PSEs pay taxes correctly which is not the case with private sector. PSEs were forced to contribute to PMCARES fund. They spend CSR funds as directed by the Govt. PSEs need to spend on research and technology upgradation. Asking to pay more of the profit will hamper their growth. On the one hand the Govt wants to sell off PSEs but on the other hand it wants to squeeze as much as possible. It’s high time the Govt apologise for its mistakes and change course to help larger majority instead of following policies which help a minuscule minority. PSEs should not be used as milking cows. They are equivalent to family silver"

Alok Roy, President of National Confederation of Officers Association (NCOA) and President of Indian Oil Officers Association (IOOA) told www.indianpsu.com "More than one Public Sector Undertakings and Banks were formed to ensure competition and avoid monopoly in the era when the sectors were not opened for private enterprises. Now, with all the sectors opened for private players and multinationals, there is no rationale of a central government enterprises to compete with each other in the same sectors. Further still these organisations are too small compared to its counterparts outside india. Accordingly now govenment is consolidating public sector banks, which is important to control the cost as there is no purpose to have small branch of 3-4 Public sectors banks in the same building. Similarly there should be merger of CPSEs also of the same sectors to make its size bigger enough to compete with multinationals, control expanses and avoid duplication of infrastructure. For example IOC, BPC & HPC having same business are competing causing duplication of infrastructure and should have been merged into one organisation. Similar is for NTPC & NHPC, ONGC & OIL etc. The size of defence PSUs are too small compared to compete with multinationals and push PM’s appeal for Atama Nirbhar Bharat".

Roy adds that the consolidation & merger would definitely improve the profitability of CPSEs to facilitate higher dividend payout to shareholders including Govt of India. Without consolidation quarterly dividend payout would either result into similar dividend payment staggered into four quarter or eating away reserves or higher debt for such CPSEs. Hence alongwith quarterly dividend payout proposal govenement of India should explore options for merger of CPSE of the same sectors in similar business.