Govt Bars CPSEs From Executing Capital Rejig

New Delhi: Central public-sector enterprises (CPSEs) have been debarred from seeking clearance for capital management and restructuring from the central government. The government has stipulated that all issues regarding capital management and restructuring of CPSEs will be discussed in the inter-ministerial forum called the Committee for Monitoring of Capital Management and Dividend by CPSEs (CMCDC), official sources told Bizz Buzz.

The inter-ministerial forum will be headed by the Secretary of the Department of Investment and Public Asset Management (DIPAM), which is under the Ministry of Finance.

In case any CPSE is not able to comply with any of the guidelines, specific exemption needs to be obtained from DIPAM through its administrative ministry or department in the same financial year. It has been observed that some ministries seek such exemptions on a post-facto basis, thereby presenting the CMCDC with a fait-accompli, the sources said adding that such practices should not be followed.

Public-sector banks (PSBs) and public-sector insurance companies, however, have been exempted from the new guidelines. Also exempted are the CPSEs under closure or liquidation proceedings or any other entity specifically exempted by DIPAM. The guidelines shall be applicable from the current financial year 2024-25.

Regarding dividend payout by CPSEs too, the government has introduced new guidelines. Now, every CPSE would pay a minimum annual dividend of 30 per cent of profit after tax (PAT) or 4 per cent of the net worth, whichever is higher.

Financial sector CPSEs, however, may pay a minimum annual dividend of 30 per cent of PAT.

The minimum dividend is only a minimum benchmark. The government has advised CPSEs to strive to pay higher dividends taking into account relevant factors such as profitability, capex requirements with due leveraging, cash reserves, and net worth.

The government has also advised CPSEs to consider paying an interim dividend every quarter after quarterly results, or at least twice a year. Unlisted CPSES may pay a dividend once in a year as the final dividend based on the previous year’s audited financials.