Country's top auditor, Comptroller and Auditor General of India (CAG), has pointed out that 24 central public sector enterprises (CPSEs) did not issue bonus shares despite having free reserves in excess of their paid up capital. The CAG observations come at a time when the government is looking to push CPSEs to either achieve their capital expenditure plans failing which they may need to either give out special dividends or go for buybacks.
This could raise the pressure on these companies to productively deploy their cash. ET had reported last week that government is looking at buybacks by state run companies to meet its ambitious disinvestment target of Rs. 56,500 crore.
In its audit report, the CAG has noted that in case of eight CPSEs, managements are yet to amend Articles of Association to provide for buyback of shares.
The report further notes that 10 CPSEs which includes MMTC Ltd, NMDC Ltd and Bharat Electronic Ltd did not formulate their investment policy for investing surplus cash. Around 36 CPSEs have cash in hand and investments worth Rs. 2.61 lakh crore at the end of March 2015.
In its audit report the CAG has observed that four CPSEs did not disburse minimum dividend of Rs.1,718 crore as required under the department of public enterprises (DPE) gui delines, despite having suffici ent profit after tax.
“Three CPSEs did not disbur se minimum di vidend of Rs. 5,237 crore due to in sufficient profit after tax, despi te having large free reserves,“ it said adding that non-comp liance with go vernment's directives in the declaration of dividend by 17 companies resulted in a shortfall of Rs.2,521 crore in the payment of dividend for 2014-15.
Last year, economic affairs secretary Shaktikanta Das had written a letter to state-owned companies and their administrative ministries that a CPSE should pay an annual dividend of 30% of profit after tax (PAT) or 30% of the government's equity, whichever is higher. “There were huge variation in dividends paid out by CPSEs and hence there was a need for a clear dividend policy,“ the letter has noted, stating that the Fourteenth Finance Commission (FFC) report had remarked that the dividends policy should cater to the requirements of the government also, as it would in case of any prudent investor or owner.
“This is especially true in times of current fiscal crunch, when the government has to cater to other public interests too,“ it said.
Last month, minister of state for finance, Jayant Sinha had that in order to tap the idle cash CPSEs, have the option of capital restructuring and adopts such practices as a part of their professional financial management.
“In view of such offers, the government may agree to tenderoffer equity, if a CPSE decides to buy-back its own shares in the process,“ he said.
The Economics Times New Delhi, 4th May 2016
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