To Help Government Reduce 30,000 Crore Deficit From Disinvestment
New Delhi: Coal India is set to cough up a dividend of around Rs 15,000 crore to the government, probably a record, to help the Centre bridge the yawning gap between its disinvestment target of Rs 40,000 crore for the current fiscal and expected realization of around Rs 10,000 crore.In addition, NMDC, another cash-rich public sector company, is likely to pay around Rs 2,500 crore by way of special dividend even as state-run oil companies turned down a request from the finance ministry, arguing that they have lined up investment plans and also have to bear a part of the subsidy burden.
The Coal India board is due to meet on Tuesday to consider an interim dividend after it went off the disinvestment list due to the controversy surrounding the sector — from irregularities in allocation of rights to slow pace of development of blocks. In fact, disinvestment in one of the largest PSUs was at the heart of the target fixed by the department of economic affairs in the finance ministry when it set an ambitious goal to close the year with a fiscal deficit of 4.8% of GDP.
With meeting the disinvestment target looking like aremote possibility and revenue collections growing slower than budgeted, economic affairs secretary Arvind Mayaram and his team began putting pressure on PSUs to pay special dividends. Mayaram went public with the demand saying that Coal India will have to pay special dividend if the stake sale didn’t materialize, a statement that is being cited as an example of poor corporate governance practice.
The finance ministry now hopes to close the year with receipts of Rs 33,000-35,000 crore from PSUs, including the disinvestment mop-up and special dividends, government officials told TOI. At the end of March, 2013, the energy giant had cash and bank balance of over Rs 18,100 crore, with bank deposits estimated at over Rs 15,000 crore. During the last financial year, it reported profits of almost Rs 9,800 crore. If the board approves the interim dividend proposal, Coal India will end up improving its own 2012-13 performance when it paid Rs 8,843 crore in dividend to the government, its highest ever.
Although the disinvestment department had lined up several PSUs for stake sale, only a handful have materialized so far, although the government is hoping to raise over Rs 5,000 crore by selling stakes in IndianOil and Engineer’s India, and another Rs 3,000 crore through a proposed exchange-traded fund comprising 11 blue chip companies. Further, it is targeting to raise money from some of its holdings in Specified Undertaking of UTI and the remaining 26% stake in Balco.
Times View: At a time when inadequate coal linkages are emerging as a major bottleneck for several industries, it defies logic as to why Coal India should be paying out such large sums as dividends rather than utilizing every rupee of its surpluses to develop new mines as fast as possible. The only conclusion we can reach is that the decision is driven not by Coal India’s corporate interests but by the government’s desire to balance its accounts. If that’s so, it is a case of extreme myopia, where window dressing is deemed to be more important than addressing economic priorities.
