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Dividend Stripping

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Before the ONGC disinvestment, the government had collected a paltry Rs 1,145 crore (mostly from the sale of shares in Power Finance Corp.) against a target of Rs 40,000 crore. That has been upped by about Rs 12,600 crore through the sale of 5 per cent of ONGC in an auction that scraped through thanks to a last-minute intervention by the LIC.

In January, the government said it was asking public sector undertakings (PSUs) to increase the dividends they paid to their principal shareholder.

The anticipated amount from dividends: Rs 30,000 crore. In FY2011, PSU dividends amounted to Rs 26,000 crore; the target in FY2012 was Rs 23,495 crore, which has now been raised. To top up the receipts, add another Rs 1,500 crore in dividend distribution tax.

At end-January, the gross deficit was Rs 22,000 crore. With two months of spending to go, the government will need a couple of thousand crore rupees more. The hole in the bucket is simply too large.


Repsol, Spain's biggest oil company, says the Libyan war and strikes at its Argentine operations have dented its profits. Net income, adjusted to exclude inventories and onetime items, slid 29 per cent from a year earlier to €355 million.

(This story was published in Businessworld Issue Dated 12-03-2012)