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Are the PSUs Venting the Expectation of a Dividend Windfall for the Government in 2021?

PSUs across India have dwindled for proper management and timely decisions. As their reeling apprehends, the government has resorted to privatization. However, it hasn’t changed the plight of the extravagant bonanza acquired from dividends. How come the government evaded repents and conquered high stakes? The government’s treasuries set its sight on a dividend windfall despite being heavily struck by the two waves of the Covid-19 pandemic. In a year that has been full of traumatic experiences and losses in revenue, treasuries could hoist the government’s revenues exponentially. Public sector undertakings, which were the most affected by the inefficient management and succumbed to the private sector’s rise, might reflect on the slightest hope.

Data released from PSUs reflect a massive appealing picture of FY21. Not only dividends recorded stakes at a five-year high, but the net profits of the state-owned companies have observed an upswing in the past year. Today’s uprightness contradicts the position of treasuries over the past two years. While the dividends extracted out of PSUs by the government slipped 42 percent in 2019, the scenario was not much different in FY2020. It dragged down astonishingly by 22 percent amid fears of lack of investment. Since then, everything has got overhauled.

Govt eyes dividend windfall from PSUs

The Indian economy has been in shackles ever since the threatening wave of the pandemic has arrived. If the troubles of the state-owned companies could have got any worse, it was inevitable during the plummet. PSUs got derailed into enormous debt, and without being able to respond substantially, their last resort was offsetting their stakes to the private corporates. With the news edging closer, it has turned out to be noteworthy for the treasury. The relief in the dividend distribution would facilitate alleviating the fret of the inclining fiscal deficit.

In FY21, the government has clenched Rs 26,104.37 crore as dividends from the listed PSUs. In retrospect, it is a monumental increase of 123 percent on the projection graph from the previous year’s data. However, if we look at the recent trends over successive years, the dividends have been affected by various factors.

The promise of advancing high dividends to the stakeholders has fallen off the radar year after year. As the government has shown sluggish improvements in the upliftment of PSUs, the kitty of the collection has reduced. The noticeable factor is acquiring knowledge on how dividends inflicted from the companies are getting utilized by the government. The injection of the cash flow into the economy is paramount to bridge the fiscal gap. And an attempt to raise the revenue aspect in the budget trajectory.

Government expects lower dividend proceeds from PSUs in FY19 - The Economic Times

A Welcome News For the Government As PSUs Propels on Announcing Dividends

With a grasp of colossal PSUs like NTPC Ltd, Natural Gas Corp hinges on announcing dividends for the quarters, waiting on the decisions of other companies. The government’s kitty gets lined up to grow further and increase its revenues substantially. The question is will these revenues mend to evolve fund management for recouping from the financial constraints of the pandemic.

Additional dividend income has been a requisite for enhancing the scope of investment. The guidelines issued back in 2016 suggested that PSUs had to pay a minimum annual dividend of 30% of profit after tax. The enterprises got entailed to announcing higher dividends. In FY22, the targeted projection of receipts of dividends from PSUs estimates to be Rs 50,000 crore. Although it seems challenging in the recession circumstances, and PSUs hovering, it might get achieved by cooperation of PSU index companies as their shares of profits have increased. While the stakes of government tax revenue got hindered, higher dividend indices would deal with financing better.

Government eyes dividend windfall from PSUs - Hindustan Times

Tanish Sachdev

Tanish seeks new opportunities as a professional content writer and writes on several fundamental topics like businesses and economics. The focal point remains on expressing opinions on critical aspects concerning the economy.

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