KOLKATA (miningweekly.com) – State-run resource majors are proving to be a bonanza for the cash-strapped Indian government ahead of the national elections.
Nudged by the government, these companies were putting up cash through special second interim dividends and share buybacks.
Having missed tax collection targets with the current financial drawing to a close on March 31, the cash payouts from State-owned resource majors are expected to help the government rein in the fiscal deficit from over-shooting the targeted 3.4% of gross domestic product.
Reports in the local media suggest that the government is expected to face a shortfall of about $11.59-billion by close of 2018/19 from lower tax collections.
The companies putting up cash to the government, the principal shareholder, include Coal India Limited (CIL), oil and gas exploration and production (E&P) major, ONGC, National Aluminium Company Limited, oil refiner-marketer and Indian Oil Corporation Limited (IOC).
While as principal shareholder in these resources companies the government is entitled to cash returns from these cash-rich companies, the move has attracted criticism from a section within the government and commentators that such funding of government will jeopardise growth plans of these companies and be inimical to the interest of minority shareholders.
In the case of CIL, the largest miner would pay an estimated $2.75-billion in the current financial year, through cumulative dividend payouts, share buybacks and sale of government holding in the company, according to regulatory announcements.
Prodded by the government, CIL would need to pay about $522-million this month through a second interim dividend, while it had already paid $652-million earlier as a first interim dividend. An additional $152-million would accrue to the government through the recently announced share buyback.
The government had already netted an estimated $1.35-billion this financial year from various offers-for-sale of government's holding in CIL, which effectively has brought down the government’s equity holding in the company to 72.19% from 78.55% during the previous year.
National oil and gas E&P company, ONHC announced an interim dividend last month and is now in the process of approving another interim dividend, which will be in addition to the estimated $582-million that the government could expect after ONGC approved a share buyback scheme.
Oil refiner-marketer IOC has declared a second interim dividend of 15% and with the government holding 53.88% of equity it can expect to net around $110-million.
However, a critical issue faced by these companies is the regulatory provision that listed companies are prohibited from announcing second interim dividend within the space of a month. Hence the final payout will have to seek clearances from stock market regulator, the Securities and Exchange Board of India.