Source The Hindu
The Union government’s strategy toward public sector undertakings (PSUs) appears to have undergone a significant shift in recent years, with a stronger emphasis on maximizing revenue from dividends and asset monetisation rather than aggressively pursuing disinvestment through stake sales.
Official data indicates that while disinvestment receipts — once a key pillar of the Centre’s fiscal strategy — have slowed compared to earlier projections, dividend payouts and profits from state-run enterprises have seen a notable rise. This change reflects a recalibration in approach, as the government increasingly views PSUs as long-term revenue-generating assets instead of entities to be privatized swiftly.
During earlier fiscal cycles, the Centre had set ambitious disinvestment targets, including strategic stake sales in major companies. However, market volatility, regulatory challenges, and valuation concerns often led to delays or scaled-back plans. In contrast, many profitable PSUs across sectors such as energy, mining, banking, and infrastructure have reported strong earnings, enabling higher dividend transfers to the exchequer.
Analysts say the renewed focus on operational performance and capital efficiency within public enterprises has contributed to improved financial outcomes. Enhanced corporate governance measures, better balance sheet management, and sectoral demand recovery have supported profitability in several state-owned firms.
The policy pivot also aligns with the government’s broader fiscal consolidation goals. By earning more from dividends and buybacks, the Centre can generate non-tax revenue without relinquishing ownership stakes in strategically important sectors. This approach offers a more stable and predictable revenue stream compared to one-time disinvestment proceeds.
However, experts caution that sustained profitability will depend on continued reforms, competitive positioning, and prudent capital allocation. They note that while dividend income provides recurring benefits, structural reforms and selective privatization may still be necessary in sectors where efficiency gains are limited.
As the government prepares future budgets, the evolving role of PSUs — from disinvestment targets to consistent revenue contributors — is likely to remain a central theme in shaping India’s fiscal policy.
