ONGC dividend prop for govt

JAYANTA ROY CHOWDHURY

New Delhi, Jan. 4: The central government today managed to milk its favourite cash cow — ONGC Ltd — by declaring a 125 per cent dividend per share. The payout will fetch the government that owns some 74.14 per cent stake in the oil explorer a whopping Rs 3,960 crore in dividend income.

However, the government was unable to get approval from the Cabinet Committee on Economic Affairs for another proposal to raise money — allowing state-run firms to buy back government shares.

"We will hold on to this proposal for some time … and try to work out a consensus," said top finance ministry officials.

This plan ran into rough weather as the ministries which control state-run firms such as NTPC, Coal India and Oil India had opposed the buyback plan as the companies had limited cash reserves for their own expansion plans, which are vital to the national interest.

The argument is that if these public sector units spent their reserves in buying back the government's stake, they would have little in their coffers to spend on expansion projects.

The government had identified SAIL, NMDC, ONGC, NTPC, Coal India, Oil India, MMTC, Neyveli Lignite, NHPC, Bhel and GAIL as the firms who could buy back a part of the government's shareholding in these companies. The government could have earned about Rs 7,500 crore from these eight PSUs, according to a study by SMC Global Securities.

Sebi yesterday cleared a share sale by PSUs to the government through an auction route without mandatory public offering. This was done to enable the cabinet to go in for a buy-back option.

The government had set a target of earning Rs 40,000 crore from divestment receipts, but with the stock market taking a nosedive after the Eurozone crisis erupted, selling government stock to the public was not considered a viable option.

North Block officials said they would explore which other PSUs could afford to give a "good dividend".

ONGC has been a favourite cash cow for the government. Last year, it paid an interim dividend of Rs 32 on every share with a face value of Rs 10 or a 320 per cent dividend. In 2009, it had given a 180 per cent interim dividend.

The ONGC board today approved an interim dividend of Rs 6.25 per equity share with a face value of Rs 5 each for the financial year 2011-12, which worked out to a 125 per cent dividend.

The department of disinvestment has identified around two-dozen cash-rich public sector enterprises with a total market cap of nearly Rs 2 lakh crore, according to sources.

The government may overshoot its budgeted deficit partly because of a rising import bill of petroleum-products and fertilisers, which it subsidises, and partly because tax collections have not been too good because of the economic slowdown.