Centre’s dividends from CPSEs exceed FY24 budget target

Centre’s dividends from CPSEs exceed FY24 budget target

The Centre’s dividend receipts from the Central Public Sector Enterprises (CPSEs) stood at Rs 43,843 crore as of January 1, crossing the 2023-24 budget estimate (BE) of Rs 43,000 crore, giving further comfort on the fiscal front.

The dividend receipts of Rs 39,086 crore so far in FY24 were 26% higher than the receipts in the corresponding period in the previous fiscal. Given that the OMCs’ profitability has improved substantially due softening of global crude prices, the CPSE dividend receipts will likely exceed Rs 60,000 crore comfortably in FY24 as against the budget target of Rs 43,000 crore.

In December, the government received substantial dividend instalments from Coal India (Rs 5,933 crore), ONGC (Rs 4,260 crore) and BPCL (Rs 2,413 crore). It also recently received about Rs 3,636 crore from Indian Oil Corporation and about Rs 1,910 crore from Power Grid Corporation of India Ltd (PGCIL) as dividend tranches. The dividend payments reflect the robust profitability of state-run commodity and energy firms, among others.

Despite a drastic fall in the profitability of oil marketing companies (OMCs), a major contributor to dividend receipts, the Centre’s dividend receipts in FY23 were around Rs 59,000 crore, 37% more than the budget target of Rs 40,000 crore.

With disinvestment receipts likely to fall short of the target of Rs 51000 crore substantially in FY24, the extra dividend receipts would cover the shortfall to a large extent.

Despite the government reducing its stake in several of these companies, the Department of Investment and Public Asset Management (Dipam)’s capital management policy of nudging CPSEs to give higher dividends to keep investors’ interest in their stocks has aided the dividend payouts.

CPSE dividend receipts under the supervision of the Dipam do not include receipts from state-run financial institutions such as banks and insurance companies.

RBI’s surplus transfer to the Centre rose 188% on year to Rs 87,416 crore in FY24 (for accounting year FY23), which was very close to Rs 91,000 crore estimated from dividend receipts from the RBI, public sector banks and financial institutions (Rs 48,000 crore) and the CPSEs (Rs 43,000 crore) in FY24.

It is to be noted that the Centre’s net tax revenues are also estimated to exceed the budget target in the current financial year, putting the Centre’s finances in a comfortable position to meet the fiscal deficit target even after meeting additional spending needs for subsidies among others.