A worker closes the door to a furnace at the Pragati Aroma Oil Distillers Pvt. factory in Kannauj, Uttar Pradesh, India (Photographer: Udit Kulshrestha/Bloomberg)  

Government Pushes Indian Oil, ONGC To Pay Second Interim Dividend

Grappling a shortfall in tax revenues, the government has pressed cash-rich public sector undertakings like Indian Oil Corporation Ltd. and Oil and Natural Gas Corporation Ltd. to pay a second interim dividend for the current fiscal after seeking regulatory nods.

While IOC has called a board meeting on March 19 to consider paying a second interim dividend, ONGC has declined saying it does not have surplus cash to make such payments within a month of an interim dividend payout, sources with direct knowledge of the development said.

As per regulations, a company cannot declare a second dividend within a month of the previous payout and companies like ONGC would need to seek an approval of the Securities and Exchange Board of India to make such a payment.

Sources said the government is struggling to meet the revised fiscal deficit target of 3.4 percent in view of shortfall in the Goods and Services Tax collections.

GST shortfall is likely to be around Rs 30,000-40,000 crore and a similar shortfall is expected in direct tax collections as well, they said.

In a regulatory filing, IOC said: "A board meeting of the company is scheduled on Tuesday, March 19, 2019...to consider declaration of 2nd interim dividend for the financial year 2018-19."

IOC had in December declared Rs 6.75 per share interim dividend alongside a Rs 4,435-crore share buyback to help the government meet its revenue targets. ONGC had announced an interim dividend of Rs 5.25 per equity share on Feb. 14. It too had approved a Rs 4,022-crore share buyback.

Sources said ONGC has told the government that it will need a SEBI approval if it has to pay a second interim dividend within a month. Also, it does not have surplus cash after payment of interim dividend and share buyback.

Sources said the government had two years back hurriedly got SEBI nod to get PSUs like IOC to pay a second interim dividend.

Last month, while presenting the annual budget for 2019-20, the government had revised upward its fiscal deficit target to 3.4 percent of GDP for the current fiscal year from the previously estimated 3.3 percent budgeted target.

In absolute terms, the fiscal deficit—the gap between the central government’s expenditure and revenue—has been pegged at Rs 6.34 lakh crore.

During April-January, fiscal deficit touched Rs 7.70 lakh crore, or 121.5 percent of the budgeted target for the current fiscal year ending March 31, government data showed.

For the current fiscal, direct tax collection has been pegged at Rs 12 lakh crore while the revised estimate for GST collections has been put at Rs 6.43 lakh crore, which is lower than the targeted Rs 7.43 lakh crore.

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