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Informist, Saturday, Apr. 18, 2026

 

By Priyasmita Dutta

 

NEW DELHI – The government's dividend receipts of INR 784.38 billion from public sector enterprises in 2025-26 (Apr-Mar) exceeded the revised Budget estimate by 10.5%, beating the target for the sixth time in a row. In absolute terms, the dividend receipts from state-owned companies in FY26 were the highest ever, but the weakest by which the collections exceeded the Budget target in percentage terms in the last six years.

 

As per revised estimates, the government saw dividend collections from public sector enterprises in FY26 at INR 710 billion, slightly higher than the INR 690 billion projected earlier. Dividend income from PSUs is an important component of the Centre's non-tax revenue, besides other major sources such as surplus transfer from the Reserve Bank of India and dividends from PSU financial institutions like banks.

 

On a year-on-year basis, the government's dividend receipts from PSUs in FY26 are 5.8% higher. In FY25, the government had collected INR 741.29 billion, beating the estimate by over INR 191 billion, or nearly 35%. Interestingly, available data shows that the government had met the target for dividend receipts from PSUs in FY15, and then missed it every fiscal until FY21. In the recent past, the government has been nudging PSUs to pay higher dividends unless they have concrete plans to deploy the cash.

 

According to current norms, PSUs need to pay a minimum annual dividend of 30% of net profit or 4% of their net worth, whichever is higher. The guideline stipulates that PSUs should pay higher dividends, taking into account relevant factors such as profitability, capital expenditure requirements with due leveraging, cash reserves, and net worth. It also says that payment of dividends at regular intervals helps revive investor interest and improve market sentiment for shares of these companies, as regular dividends attract investors to PSU stocks and retain them in the hope of future dividends. These norms, however, do not apply to public sector banks and public sector insurance companies.

The trend of dividend payouts by PSUs to the government remained the same over the years, with energy sector and power sector enterprises topping the chart. In FY26, the government received INR 102.52 billion from Coal India Ltd., the highest contributor under this head. Following closely, Oil and Natural Gas Corp. Ltd. paid INR 100.02 billion, followed by Indian Oil Corp. Ltd. paying out INR 50.91 billion. Within the power sector, Power Grid Corp. of India Ltd. paid INR 48.25 billion to the government and NTPC Ltd. paid INR 40.88 billion.

 

Higher dividend receipts from PSUs and record surplus transfer from the central bank have helped the government continue with its fiscal consolidation in the post-pandemic years. Robust dividends will be useful for the government in FY27, with stress already seen building up on its fiscal position following the war in West Asia. Besides, while the Budget pegged FY27 fiscal deficit at 4.3% of GDP, the government now sees it at 4.5% of GDP, following a downward revision in India's nominal GDP under the new series.

 

The ongoing war has already prompted the government to cut excise duties to prevent the pass-through of higher fuel costs to consumers, posing a risk of fiscal slippage, with pressure building on government revenues and a potential rise in expenditure.

 

Finance Minister Nirmala Sitharaman went on record last month to say the government will manage its fiscal deficit in FY27 despite the cut in excise duty on petrol and diesel. However, some experts, including Moody's Ratings, disagree. "... we expect higher expenditure commitments and weaker revenue mobilisation to constrain fiscal space and slow the pace of fiscal consolidation in the absence of offsetting revenue measures or expenditure rationalisation," the rating agency said.  End

 

Edited by Ashish Shirke

 

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