In association with

Govt acts tough with rich PSU, asks to invest more

At a time of high inflation and a widening fiscal deficit, the government seems to be seeking help from two main sources. The first is Life Insurance Corporation of India (LIC), which acts as the govt's saviour every time it needs money and the second is -cash-rich public sector undertakings (PSUs).

According to a report inBusiness Standard, many PSUs have been asked to invest their spare cash or park a portion those funds with the government.

"At a recent meeting, PSU were asked to form a plan to invest Rs 1.2 lakh crore lying with banks or give a part of it to the government in the form of special dividends, a finance ministry official said", as per BS.


The article further goes on to state that a committee is reviewing guidelines on the investment of surplus funds by central public enterprises.

A study by Firstpost found that cash-rich PSUs, (according to data available for the year ended March 2012) were sitting on cash of almost Rs 2,00, 000 crore. Coal India had the highest amount of cash of Rs 58,202 ,followed by ONGC (Rs 37,364 crore) and NMDC(20,264 crore) (see table).

However, this is not the first time the government has tried to extract money from PSUs. Earlier in January, the government had held meetings across the board with PSU and PSU banks and managed to get around Rs 7,000 crore as dividends to bridge the deficit gap. In addition, it was also considering other options like PSU cross holdings (cash rich PSUs buying stake government stake in other PSUs), and PSUs buying back their own stock, including from the government among other options.

As per Union Budget estimates for 2012-13, the government is looking to raise Rs 30,000 crore through a part-sale of its stake in various public sector companies. And, it expects a dividend income of over Rs 50,000 crore from PSUs and the RBI as well.

Whether the stake sales will go ahead as planned, and whether it will actually manage to collect its expected dividend remains a matter of opinion at this point in time.

One thing is for sure though: this will not be the last attempt by a cash-hungry government to try and suck funds from public enterprises.

Published Date: Jun 18, 2012 13:50 PM | Updated Date: Dec 20, 2014 18:08 PM

Also See