Public sector companies sitting on large reserves but without adequate capital expenditure plans may soon be asked to pay special dividends as a means to generate higher non-tax revenue.
The finance ministry and the Planning Commission have started an exercise to identify such public sector undertakings, North Block officials said. The combined reserves of top ten PSUs at the end of March 2005 were more than Rs 151,000 crore (Rs 1510 billion).
The officials said the issue would be taken up with the nodal ministries when discussions on internal and extra budgetary resources numbers for the current financial year, as also for 2006-07, were held around October.
If the government decides to seek special dividends, the identified PSUs will be asked to pay the amount with the interim dividends during the third and fourth quarter of the financial year.
The officials said the public sector companies had been adopting a conservative approach while planning their investments.
"In a large number of cases, the debt-equity ratio was of the order of 0.5:1, while private companies have gone in for at least 2:1. There is no point in using one's own reserves when one can go to the market," an official said.
According to the last Public Enterprises Survey, at the end of March 2003, the debt-equity ratio for over 200 PSUs was estimated at 0.87:1 against 0.95:1 during the previous financial year. It also said the dividend payout by the PSUs was over 42.7 per cent during 2002-03.
Officials pointed out that asking PSUs to give out dividends from their reserves would have the additional benefit of improving market sentiments, as more PSUs would approach the market to generate resources. There can, however, be a flip side.
"There can be an increased pressure on the interest rates if more PSUs borrow from the market. We are looking at all these aspects and will work out a plan shortly," said the official.
The government had mopped up Rs 13,437 crore (Rs 134.37 billion) by way of dividends from PSUs during 2004-05, while the government had budgeted to collect Rs 16,091.74 crore (Rs 160.92 billion) during the current fiscal.
A larger non-tax revenue receipt of the Centre would help it lower the fiscal deficit, which is budgeted at 4.3 per cent to 4.1 per cent.
