Rising PSU Dividends: A Fiscal Strategy and its Implications
UPSC Relevance
Prelims: Indian Economy (Public Sector Undertakings - PSUs, Dividends, Disinvestment, Government Budgeting, Non-tax revenue, Department of Investment and Public Asset Management - DIPAM).
Mains:
GS Paper 3: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment; Government Budgeting; Investment models; Role of the public sector.
Key Highlights from the News
Over the last five years, the central government's dividends from Public Sector Undertakings (PSUs) have nearly doubled, reaching ₹74,000 crore in the 2024-25 financial year.
A large portion of this revenue comes from a few companies in the fuel sector, such as oil, gas, and coal.
Five companies alone – Coal India, ONGC, IOC, BPCL, and Gail – contributed over 42% of the total dividends since 2020-21.
The government is striving to extract maximum dividends from profitable PSUs because disinvestment has not proceeded at the expected pace.
The Department of Investment and Public Asset Management (DIPAM) has tightened the dividend policy for PSUs.
Under the new rule, each Central Public Sector Enterprise must pay a minimum dividend of at least 30% of its Profit After Tax (PAT) or 4% of its net worth (whichever is higher).
While oil companies IOC and BPCL increased dividends to the government by 255%, they only reduced petrol prices for the public by 2%, even though crude oil prices fell by 65%.
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