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CPSE dividend: Surplus CPSE dividend unlikely to offset disinvestment revenue shortfall in FY24

Unlike in the last fiscal, surplus dividend by Central Public Sector Enterprises (CPSEs) may not entirely make up for an expected steep shortfall in the government’s disinvestment proceeds in FY24 from the budgeted Rs 51,000 crore, now that the strategic sale of IDBI Bank could spill over to FY25, a senior official said.

This could prompt the government to trim its combined disinvestment and dividend target of Rs 94,000 crore in the revised estimate for FY24, he told ET.

The government could, however, realise the dividend target of Rs 43,000 crore from CPSEs (barring banks and other financial institutions) for FY24, the official indicated.

But any shortfall in the combined target may not be substantial enough to disrupt the government’s plan to rein in its FY24 fiscal deficit at 5.9% of gross domestic product (GDP), said another official. As such, the combined target makes up less than 3.5% of the government’s budgeted non-debt receipts for FY24.

Last fiscal, dividends by the CPSEs had exceeded the government’s revised estimate by over 37%, more than offsetting a 29% drop in the divestment revenue. So, against a revised target of Rs 93,000 crore, the combined revenue had touched Rs 94,282 crore in FY23.

However, this time around, the expectations of large surplus dividends by large oil public sector undertakings (PSUs), which typically account for a significant chunk of such non-tax revenue, remain uncertain, given the volatility in global crude oil prices. Of course, CPSEs from some other sectors, such as power, are doing well and may cough up good dividends, said one of the officials.“If the global prices remain high and oil PSUs don’t pass on the costs to consumers (in the build-up to the 2024 elections), their profitability and ability to pay dividend may falter,” added the second official.Given the complexity of the disinvestment process, where factors beyond its control, including market conditions, too, play a key role, the government has, for all practical purposes, started viewing both dividends and disinvestment as one unit of its non-tax revenue. However, these two are accounted for separately in the budget to comply with accounting norms, he added.

According to the latest Department of Investment and Public Asset Management (DIPAM) data, the government has raked in disinvestment revenue of Rs 8,000 crore and dividend of Rs 20,338 crore so far this fiscal. A large part of the dividend revenue typically flows in during the last quarter of a fiscal.

Earlier this month, DIPAM secretary Tuhin Kanta Pandey said the stake sale in IDBI Bank may not be completed by March 2024. The transaction is “on course” but there are aspects—like the RBI’s assessment of the fit and proper criteria for suitors—that need to be concluded first.

The government is looking to divest 30.48% of its 45.48% stake in IDBI Bank, alongside Life Insurance Corp of India (LIC), which will sell 30.24% from its holding of 49.24% in the bank.

At Friday’s share price on the BSE, the sale of its 30.48% stake in IDBI Bank could fetch the government around Rs 19,915 crore.

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