Govt to set lower dividend target amid issues

Has also revised estimate for outgoing year due to poor performance of state enterprises

ISLAMABAD: With returns on investments in over two dozen state-owned institutions constantly on the decline, authorities plan to set the dividend income target for the federal government at only Rs76.5 billion in the next budget, the lowest in the last four years.

Against the outgoing fiscal year’s original estimate of Rs93.3 billion, the government is planning to set 2018-19’s dividend income target from 27 institutions at only Rs76.5 billion, said officials. In 2013-14, the government had received Rs68 billion in dividends.

The proposed dividend target for the next fiscal year 2018-19 is Rs16.7 billion less than the outgoing fiscal year’s original target of Rs93.3 billion.

The government expects that during the outgoing fiscal year dividends from Pakistan Arab Refinery Limited, Sui Southern Gas Company Limited (SSGCL), Government Holding Private Limited (GHPL), and Oil and Gas Development Company Limited (OGDCL) would be less than the initial estimates.

Officials said that oil and gas sector companies have adversely been affected by the chronic circular debt, which also disturbed their dividend distribution plans. The power sector’s circular debt has crossed Rs1 trillion.

Officials added that the development means the dividend income target for the outgoing fiscal year has also been reduced from Rs93.3 billion to only Rs71 billion. There is a reduction of Rs22.3 billion or 24%.

On the basis of this reduced collection from 27 government-owned financial and non-financial institutions, the next fiscal year’s target is proposed to be set at only Rs76.5 billion, they added.

The dividends represent return on the federal government’s investment in the share capital of financial institutions and commercial enterprises. The receipts vary from year to year depending upon profits earned each year by these bodies and declaration of dividends on share capital.

The sources said that poor management in some of these enterprises is another reason for the lower estimates.



Company-wise breakdown

For fiscal year 2018-19, the government may set the dividend target from OGDCL at only Rs25 billion, said the sources. This is Rs10 billion less than the original estimates for the outgoing fiscal year. For fiscal year 2017-18, the government set the dividend target at Rs35 billion, which it has now lowered to Rs25 billion. During the current fiscal year, OGDCL has so far paid Rs20.8 billion in dividend to the federal government, they added.

The target for Pakistan Petroleum Limited, which is the second main entity giving dividend to the federal government, is expected to be set at Rs13 billion, which is at the current year’s level. The entity has already paid Rs8 billion to the federal government, the sources said.

GHPL’s dividend target is proposed to be set at Rs12 billion for the next fiscal year. It is Rs5 billion less than the original target set for the outgoing fiscal year. GHPL will give only Rs10 billion dividends to the federal government, said the sources.

The dividend target for Pak Arab Refinery Limited is proposed to be set at only Rs10 billion for the next fiscal year. For the outgoing fiscal year, the target for the refinery was Rs12 billion but the entity is now expected to give only Rs8 billion.

The government has estimated receiving only Rs500 million from SSGCL in dividend income for the fiscal year 2018-19. SSGCL was expected to give Rs1.5 billion in dividend to the federal government for the outgoing fiscal year. Due to its fiscal constraints, the Rs1.5-billion dividend is unlikely to be disbursed, the sources said. In contrast, Sui Northern Gas Pipelines Limited’s dividend target is proposed to be set at Rs1.5 billion for the next fiscal year. The entity is expected to give Rs1.5 billion as dividend in the outgoing fiscal year against a target of Rs500 million.

Pakistan Telecommunication Company Limited’s dividend target for the next fiscal year is proposed at Rs7.5 billion, which is equal to the outgoing fiscal year’s original target.

Mari Petroleum’s dividend target for the next fiscal year could be proposed at only Rs200 million for this fiscal year, its target was Rs600 million, which has now been lowered to Rs150 million, the sources said.

Pakistan State Oil would give Rs1.5 billion as dividend next year, which is at the current year’s level.

National Insurance Corporation’s dividend target for the next fiscal year is Rs1.5 billion, State Life Insurance Corporation Rs1.3 billion and Pakistan Reinsurance Corporation Rs550 million.

The dividend income from Trading Corporation of Pakistan is estimated at only Rs200 million, from Fauji Fertilizer is Rs100 million, Pakistan National Shipping Corporation is Rs300 million and National Fertilizer Corporation is Rs100 million.

From the five financial institutions only Rs895 million dividend incomes has been estimated in the next year’s budget. This is slightly higher than outgoing fiscal year’s original target but about Rs16 million less than the revised estimates.

Published in The Express Tribune, April 24^th, 2018.

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