The Centre’s FY23 dividend revenue target of Rs 40,000 crore from the central public sector enterprises (CPSEs) looks increasingly challenging, given the heavy losses being incurred by the state-run oil marketing companies. Besides, windfall tax on crude will weigh on dividends to be paid by Oil and Natural Gas Corporation (ONGC).

The Centre had garnered Rs 59,000 crore in dividends from CPSEs in FY22, 28% more than the target of Rs 46,000 crore for the year, thanks to a sharp rise in prices of commodities like metals, mining and petroleum, which boosted the profits of these firms. The share of the petroleum sector in such dividend receipts rose to 38% in FY22 compared with 26% of the relevant target in FY21.

“Oil marketing companies usually pay high dividends, but this year they will pay very little due to heavy losses reported by them. So, it will be challenging to meet the dividend receipts target for FY23,” an official said.

State-run fuel retailers have been high dividend-paying companies over the years. Indian Oil had declared a total dividend of Rs 11,568 crore in FY22 (48% of its net profit for the year), 51% of which was cornered by the Centre.

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The three state-run retailers – IOC, BPCL and HPCL – which supply over 90% of domestic fuel supplies have suffered a combined loss of Rs 18,480 crore due to erosion in the marketing margin on petrol, diesel and domestic LPG in Q1FY23. ICICI Securities has estimated these three companies operating losses at about Rs 23,000 crore in Q2FY23 due to weak refining and marketing margins and inventory losses.

The government’s decision to levy special additional excise duty on crude and export taxes on diesel, petrol (withdrawn later) and jet fuel with effect from July 1 to corner a share of the windfall gains of crude oil producers like ONGC and refiners, including state-run IOC and BPCL may also lower dividend payout in FY23. However, the move will result in additional tax revenues from these firms.

ONGC had paid a dividend of Rs 11,448 crore in FY22, 59% of which went to the Centre.

During the current financial year so far Rs 15,709 crore has been obtained through dividends from the CPSEs, which is 39% of the full-year target for such receipts. This includes the final dividend tranches of about Rs 2,408 crore from ONGC and another Rs 1,745 crore from IOC for FY22 paid in September.

The dividend receipts from the Reserve bank of India came down 69% on the year to Rs 30,307 crore in FY23 (for FY22), which was a little lower than what has been factored in the current year’s budget.