wait to see its profitability for a substantial period of the fiscal and get more clarity on long-term investment plans before taking a final call.
A sluggish economic environment and the resultant less-than-targeted levels of revenue collections have already put pressure on the government, which has set a target to reduce the fiscal deficit for the fiscal to 4.8% of GDP. It has recently announced a clutch of austerity measures — many of which were reiterations of existing rules — to curb expenditure.
So far this fiscal, the government has raised only R828 crore through stake sales, in MMTC and Hindustan Copper.
The government feels that buyback of government shares by Coal India may be a more palatable option for the workers’ unions as it does not involve any transfer of shares to outsiders. Declaration of special dividend may, however, be contested at the board as the twin proposals could substantially reduce company the cash reserves and hit its investment plans.
The government has already warned cash-rich PSUs not keep the money idle and plan investments or else face a direction to declare special dividends.
In May this year, the Prime Minister’s Office also met the heads of all major PSUs and at the meeting a capital expenditure plan target of Rs 1.41 lakh crore was finalised for the current fiscal in case of 23 companies.
The PSUs were also told that this investment would be monitored closely so that in the event of a slippage, the government could consider companies to declare special dividends or buy back their shares. This was also supported by finance minister P Chidambaram, who has instituted a quarterly monitoring mechanism. The cash reserves of 25 rich PSUs are estimated to be in the region of Rs 2.5 lakh crore.