Government nudges ONGC, IOC for 2nd interim dividend

In its endeavour to combat the issue of shortfall in tax revenues, the Government of India is pursuing cash-rich public sector undertakings such as Indian Oil Corporation (IOC) and Oil and Natural Gas Corporation (ONGC) to pay a second interim dividend.

If these companies fork over a second interim dividend for the current fiscal year upon receiving the required regulatory approvals, the government’s strain will be alleviated to a certain extent. Presently, the government is putting itself out to meet the revised fiscal deficit target of 3.4 per cent in the face of shortfall pertaining to GST collections. The shortfall in GST collections is somewhere in the vicinity of Rs. 30,000 crore to Rs. 40,000 crore. Alarmingly, a comparable shortfall is anticipated in direct tax collections as well.

In response, Indian Oil Corporation has summoned its Board of Directors to a meeting scheduled on March 19 to contemplate the payment of a second interim dividend. Previously, the company had declared an interim dividend of Rs. 6.75 per share in December, in addition to a share buyback of Rs. 4,435 crore.

On the other hand, ONGC has turned down the government’s request on the grounds that it does not possess the surplus cash required to make such payments within a month of an interim dividend payout. ONGC had previously declared an interim dividend of Rs. 5.25 per equity share on February 14. Furthermore, it too had sanctioned a share buyback to the tune of Rs. 4,022 crore.

As per the regulatory norms, companies are not permitted to declare an interim dividend within a month of the previous payout. Therefore, companies such as ONGC are obligated to seek the approval of the Securities and Exchange Board of India before declaring such a payment.

In the interim budget for 2019-2020, the government revised its fiscal deficit target upwards to 3.4 per cent of GDP for the current fiscal year. Its previously estimated budgeted target, however, was 3.3 per cent. In absolute terms, the fiscal deficit, which represents the gap between the central government’s expenditure and revenue, has been pegged at Rs. 6.34 lakh crore. Based on the data shared by the government for the current fiscal year ending March 31, the fiscal deficit touched Rs. 7.70 lakh crore during April to January. This represents 121.5 per cent of the budgeted target.

For the ongoing fiscal year, the direct tax collection has been pegged at Rs. 12 lakh crore. Meanwhile, the revised estimate for GST collections has been fixed at Rs. 6.43 lakh crore. This is lower than the targeted Rs. 7.43 lakh crore.

On Thursday, the shares of ONGC opened at Rs. 149.70, and hit a high and low of Rs. 150.95 and Rs. 149.60, respectively. At 11:02 am, the stock was trading at Rs. 150.45, up 0.57 per cent.

Similarly, the shares of IOC opened at Rs. 150.00 and hit a high and low of Rs. 152.15 and Rs. 149.50, respectively. At 11:02 am, the stock was trading at Rs. 150.90, up 1.34 per cent.

Meanwhile, the BSE Sensex stood at 37,812.89, up 60.72 points or 0.16 per cent.