Mumbai: Crisil Research on Monday suggested that the government take out special dividends from public sector companies to be able to meet its fiscal deficit target for the current financial year.
Crisil Research, an arm of rating agency Crisil Ltd, said it expects the top 20 public sector undertakings (PSUs) to meet most of their capital expenditure requirements through internal accruals and debt inflows.
“By the end of this fiscal, the pre-dividend corpus with these companies is expected to be around ₹ 1.60 trillion. We estimate these companies are well placed to distribute 40% of the corpus ( ₹ 64,000 crore) as dividend without impacting growth plans. That is ₹ 27,000 crore more than the ₹ 37,000 crore dividend paid by these companies last fiscal (2012-13)," Crisil said in an emailed statement.
Crisil estimates the government can get an excess payout of ₹ 20,000 crore in proportion to its shareholdings out of the ₹ 27,000 extra dividend paid by these PSUs.
“Apart from the expected shortfall in tax revenue collections, the Union government may not be able to meet its disinvestment target, which could result in it falling short of the budgeted fiscal deficit. In such a scenario, the cash reserves of PSUs provide an alternative source of income," Mukesh Agarwal, president, Crisil Research, said in the statement.
“However, a lot will depend on whether the government is able to convince the companies to part with the surplus cash as a special dividend," he added.
Crisil expects India’s fiscal deficit to be at 5.2% of the gross domestic product (GDP). The additional ₹ 20,000 crore in dividend income will cut this by 20 basis points (bps), taking the deficit closer to the government’s target of 4.8% without it having to trim spending in a weak economic climate, Crisil said. A basis point is one-hundredth of a percentage point.
Sandeep Sabharwal, senior director, Crisil Research, said further spending cuts by the government will create growth hurdles. “Hence, the government could persuade companies with large cash reserves to announce special dividends or a buyback programme," Sabharwal said.
Crisil’s analysis is based on the cash surpluses of the 20 PSUs—Bharat Electronics Ltd, Bharat Heavy Electricals Ltd, Bharat Petroleum Corp Ltd, Coal India Ltd (consolidated), Container Corporation Of India Ltd, Engineers India Ltd, GAIL (India) Ltd, MMTC Ltd, MOIL Ltd, National Aluminium Co. Ltd, Neyveli Lignite Corp. Ltd, NHPC Ltd, NMDC Ltd, NTPC Ltd, Oil India Ltd, ONGC Ltd, Power Grid Corp. of India Ltd, Shipping Corp. of India Ltd, SJVN Ltd and Steel Authority of India Ltd.