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Is the Modi govt acting hastily to raise revenue as FY17 draws to a close?

LiveMint logoLiveMint 27-03-2017 Nasrin Sultana

Mumbai: With Coal India Ltd’s (CIL) second interim dividend in less than a month, the government seems to be in a tearing hurry to chase its fiscal deficit target in fiscal 2016-17.

In a hasty move, the state-run firm has declared interim dividend of Rs1.15 per share on Sunday. This is addition to the interim dividend of Rs18.75 per share, CIL had declared in March itself. The government owns around Rs79.78% in CIL.

The government earned Rs1,12,127 crore from dividend and profits in FY16 and is estimated to see a rise of 37% to Rs1,53,222 in this fiscal. The government has budgeted earnings of Rs1,42,430 crore in FY18.

Just as the financial year 2016-17 is drawing to a close, there are a series of dividend declared by state-owned firms in March.

Three oil-marketing companies declared second interim dividend last week just after less than a month ago. Indian Oil Corp. Ltd (IOCL) declared second interim dividend of Rs4.50 per share or 45% of equity share capital. Hindustan Petroleum Corp. Ltd (HPCL) declared interim dividend of Rs6.40 per share while Bharat Petroleum Corp. Ltd (BPCL) announced second special interim of Rs12 per equity share or 120% of paid-up equity share capital.

In addition, Vedanta Group firm Hindustan Zinc Ltd (HZL) paid largest dividend in 2016-17. It announced a special dividend of Rs13,985 crore for 2016-17, taking the aggregate amount paid by it for the fiscal to Rs27,157 crore. Of the total Rs27,157 crore, Rs11,259 crore will go to the government.

So far in FY17, 22 public sector undertakings (PSUs) firms have declared dividends in FY17 amounting to Rs35,345.1 crore. ONGC has paid dividend of Rs4,644 crore, IOC has paid Rs5,104 crore while NHPC paid Rs1,402 crore. Last fiscal, CIL had paid highest dividend of Rs17,306.84 crore, out of the total Rs54,002.71 crore earned.

In contrast, PSU banks have not yet declared any dividend so far which may hit the government’s coffer. The government owns majority shares in all the public sector banks and will see a decline in revenue if PSU banks do not declare dividends in FY17. Last fiscal, 14 state-owned banks did not declare dividends.

However, the government seems to be on its way to achieve fiscal consolidation as it revised estimate of fiscal deficit in 2016–17 at 3.2% of the GDP, down from a budgeted 3.5%.

In accordance with the recommended 3% fiscal deficit for the next three years by the newly constituted fiscal responsibility and budget management, or the FRBM committee, it is expected to stay at 3.2% in FY18 and then down to 3% in the following year.

In an earlier PricewaterhouseCoopers note, the consultancy firm said, “The gradual decline in fiscal deficit assures prudent fiscal consolidation without sacrificing public expenditure, while private sector investment is expected to be sluggish. The focus now will be on revenue and capital expenditure as the new budget does away with the plan and non-plan expenditure.”

The government has raised about Rs39,368.69 crore through disinvestment this fiscal as per data available on the Department of Investment and Public Asset Management, or DIPAM, website.

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