Modi’s government now targets Public sector companies!

10 Rupee Coin
10 Rupee Coin

Modi’s government is demanding crores of rupees in dividends from 12 government owned companies to make up for an expected tax revenue shortfall this fiscal year, as a slump in economic growth risks New Delhi overshooting its fiscal deficit target.

The ministry asked 12 of the companies to payout between 30 percent and as much as 100 percent of their 2016/17 or 2017/18 net profit in dividends, share buybacks or bonus shares. The other two companies were exempted.

The demand has been made following a finance ministry assessment on Oct. 25 of the financial health of 14 state companies, including top miner NMDC Ltd and trading firm MMTC Ltd, according to a government document.

All state companies evaluated by the government sought exemptions. Modi’s government budget is under pressure this year following an unexpected slump in economic growth, which slipped to its lowest level in three years in the three-months ending June, the first quarter of the 2017/18 fiscal year.

As of September, the half-way mark for the fiscal year, the budget deficit had reached 4.99 trillion rupees or more than 91 percent of its full-year target.

Surjit Bhalla, a member of the prime minister’s economic advisory council, told in an interview in October that the government wanted to stick with a budget deficit target of 3.2 percent.

The government’s revenues have also been hit by a sharply lower dividend from the central bank.

Three unlisted companies from defence and railways were asked to pay a maximum 100 percent of their net profit as dividend, the document showed.

A. Prasanna, an economist with ICICI Securities Primary Dealership in Mumbai, said the government had the right to seek higher dividends from cash-rich companies as long as the money was sitting idle.

“But asking all public sector units to step up investments and dividends at the same time may become counterproductive,” he said. ($1=64.97 Indian rupees)

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