With Healthy Dividend Accrual From Public Sector Units, Will Modi 3.0 Veer Away From Disinvestment?

According to the Department of Investment and Public Asset Management, so far in the current financial year, the centre has received Rs 4,887.01 crore through dividend from the CPSEs.

In November 2020, the government issued an advisory asking PSUs to be consistent in their dividend payouts.

In fact, according to senior Finance Ministry officials, the government could well switch gears and focus more on strengthening the performing PSUs instead of privatisation and disinvestment. “The government may not go in for any mega privatisation drive considering the challenges that the exercise involves. It may not be a Budget announcement ... as and when the need arises, the exercise could be taken up on a case-to-case basis,” the official said.  

NDA 2.0 Failed To Meet Disinvestment Target Even Once

From 2019-20, the government has been continuously missing disinvestment targets it had set for itself. The Secretariat had highlighted this in a  report last year. 

For 2023-24, the government had set a disinvestment target of Rs 51,000 crore but managed to raise only about Rs 14,564 crore. The government has been continuously missing its disinvestment targets. In 2022-23, against the disinvestment target of Rs 65,000 crore, the government garnered Rs 31,059 crore.

The healthy dividend inflow has however made up in terms of revenues for the government’s slack in selling the family silver to earn a buck.

Though earlier many pundits had indicated that a few more state-owned banks could be merged in a bid to create State Bank of India -like lenders, top officials said that the government will not be keen on such mergers anymore in the near future. The merger exercise of the PSU banks will not be easy either.

“The government owned banks together registered a net profit of Rs 1,41,203 crore and paid a dividend of over Rs 18,000 crore. If all the banks are performing significantly better than expected, why should the Centre be allowed to either go in for mergers and reduce the number of lenders or privatise?” C H Venkatachalam, general secretary, All India Bank Employees Association (AIBEA) told The Secretariat. The 12 public sector banks together have paid dividends worth more than Rs 18,000 crore to the government during 2023-24. In the previous financial year, this figure had stood at Rs 13,804 crore.

The Dividend Bonanza

Meanwhile, the higher-than-expected dividend from the CPSEs alone along with the Reserve Bank of India’s Rs 2.11 lakh crore dividend transfer to the central government will provide much needed fiscal space to Finance Minister Nirmala Sitharaman.

The fiscal deficit for 2023-24 at 5.6 per cent – also lower than the previously estimated 5.8 per cent will further help in making larger allocations for key sectors without disturbing the macro-economic target. Sitharaman is also expected to carve out measures that would leave more money in the hands of the common citizens as she will play a crucial role in steering India into becoming the world’s third-largest economy.

She will have to delicately balance her stance by being pro-business as well as pro-poor while focusing on a fair distribution of wealth.

“The healthy dividend income has been a boon and this will aid the government in several pro-poor schemes while focusing on economic growth and reforms,” Gopal Krishna Agarwal, BJP’s spokesperson on economic affairs told The Secretariat.

Earlier, the finance ministry had said that with a $5 trillion economy, India will become the third-largest economy in the world in the next three years and could touch $7 trillion by 2030. Naturally, global businesses and strategic communities will carefully scrutinise India’s next series of policy moves.