Inspect PSU dividend exemption requests: Finance Ministry tells advisors

NEW DELHI: Finance Ministry has sounded out financial advisors in every ministry to closely scrutinise applications by PSUs seeking exemption from payment of the mandatory 30 per cent dividend to the government.

In a strict instruction to the financial advisors, the Finance Ministry has asked them to vet the proposal from CPSEs thoroughly and see if they meet the specified norms for exemption.

Only such applications that meet the norm should be forwarded to the finance ministry to make a decision, the finance ministry has told them.

Each ministry has financial advisors usually in the rank of joint secretary or additional secretary. They are supposed to be Finance Ministry's eyes and ears in that ministry.

The parameters which are to be looked at by the financial advisors before considering a CPSE for exemption include cash and bank balance, capex/business expansion needs, long-term borrowing, net-worth of the CPSE and its capacity to borrow and retention of profit for further leveraging in line with capex.

"The analysis has to confirm that the retention of funds augmenting its net-worth is being optimally leveraged to ensure higher investment by the CPSE," an official said

As per the norms, CPSEs have been mandated to pay dividend at the rate of 30 per cent of net profit or 5 per cent of the networth, whichever is higher.

However, CPSEs can claim exemption from administrative ministry, provided it meets certain parameters.

The Department of Economic Affairs and the Department of Investment and Public Asset Management ( DIPAM) in a recent meeting has asked the financial advisors to ensure that CPSEs did not sit on idle funds.

The government aims to collect over Rs 53,883 crore in dividends from CPSEs in the current fiscal, up from over Rs 44,365 crore in 2015-16.