PSU Dividends to Centre Almost Double Since 2020

📊 A Deep Dive into Fiscal Management, Energy PSUs, and Public Interest | By Suryavanshi IAS

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🔍 Headline Insight: Why This News Matters

The Centre has nearly doubled the dividends it receives from Public Sector Undertakings (PSUs) since 2020 — collecting ₹74,017 crore in 2024–25 compared to ₹39,558 crore in 2020–21.

🔎 This growth comes from a concentrated group of oil, gas, and coal PSUs — raising key questions about India's fiscal dependency on fossil fuel firms and the ethics of public pricing.

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🏛️ Understanding Dividends: PSU Contribution to Union Budget

What are Dividends?

• A dividend is a share of a company’s profit paid to its shareholders.

• For PSUs, the Government of India is the majority shareholder, and thus receives a portion of the profits through dividends.

Role in Budgeting:

• Dividends form a key part of Non-Tax Revenue in the Union Budget.

• They help contain the fiscal deficit without increasing taxes or borrowing.

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🛢️ Key Fuel PSUs: The Real Cash Cows

According to DIPAM data (2020–2025), 5 major PSUs have together contributed ₹1.27 lakh crore in dividends — a staggering 42.3% of the total ₹3 lakh crore collected by the government from non-banking PSUs.

PSU	Sector	Observations
Coal India Ltd	Coal & Mining	World's largest coal producer, consistently profitable
ONGC	Oil & Gas Exploration	Owns HPCL; major dividend contributor
IOC	Oil Marketing	Saw a 255% increase in dividend payouts
BPCL	Oil Marketing	Dividends surged, despite drop in crude prices
GAIL (India)	Natural Gas Distribution	Maintains strong fiscal performance

🧾 What the Numbers Show (2020–2025):

Year	Total Dividend (₹ crore)
2020–21	₹39,558 crore
2021–22	₹48,173 crore
2022–23	₹57,492 crore
2023–24	₹68,999 crore
2024–25	₹74,017 crore

➡️ Total: ~₹3 lakh crore

➡️ Growth: Nearly 87% increase in 5 years

⚠️ Note: These figures exclude dividends from RBI and nationalised banks.

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⛽ Price vs Profit: Are OMCs Profiting Too Much?

IOC & BPCL:

• 📈 Dividend to Govt ↑ 255%

• 🛢️ Crude oil prices ↓ 65%

• ⛽ Petrol prices for citizens ↓ only 2%

This mismatch raises public policy concerns:

• Should OMCs prioritize profit for government revenue or price relief for consumers?

• Is the government indirectly profiting from citizens’ fuel payments?

🧩 Ethical Governance Question: Are PSUs fulfilling their social contract?

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🧮 Disinvestment vs Dividends: A Calibrated Fiscal Strategy

Background:

• Post-2020, the Centre’s disinvestment targets consistently fell short (e.g., LIC IPO delays, BPCL sale stalled).

• In response, the government strategically shifted to increasing dividend collections from profitable PSUs.

What Government Sources Say:

“We’re taking a calibrated approach between dividend and disinvestment to maintain fiscal stability in a volatile global environment.”

This has:

• ✅ Reduced immediate reliance on asset sales

• ✅ Helped manage the fiscal deficit amid pandemic and global slowdown

• ⚠️ But also increased dependence on non-renewable energy companies

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🧠 UPSC Relevance: Holistic Coverage

🔷 Prelims Focus:

• Key economic terms: Dividend, Non-Tax Revenue, OMC, Disinvestment

• Know major energy PSUs and their roles

• Budget data sources: DIPAM, Economic Survey

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🔷 Mains GS Paper 3 (Economy):

📝 Sample Question:
Q. The rising share of PSU dividends in Union Budget revenues indicates a shift in non-tax revenue strategy. Critically examine this trend and its implications.

Answer Points:

• Data-backed growth in dividends

• Over-reliance on fossil fuel PSUs

• Ethical conflict between profit vs public service

• Sustainability & ESG considerations

• Need for diversification in public asset management

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🔷 Mains GS Paper 2 (Governance):

• Role of PSUs in delivering public service vs profit

• Balancing welfare with fiscal management

• Accountability in public pricing and dividends

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🔷 Ethics & Essay Topics:

• “Public Institutions must serve both the state and society — not just one.”

• “Fiscal prudence vs social justice — navigating the Indian economic dilemma.”

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📌 Criticism & Challenges

1. Overdependence on fossil fuels
   → Conflicts with India’s net-zero ambitions

2. Inequity in pricing
   → Common man pays high fuel prices while government profits rise

3. Disinvestment delays
   → Reduces capital infusion and private efficiency in PSUs

4. Limited public scrutiny
   → Dividend strategies aren’t debated like budget allocations

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✅ Way Forward

Challenge	Policy Suggestion
Pricing mismatch	Transparent pricing linked to global markets
Fossil dependency	Diversify dividends to include renewables & tech PSUs
PSU inefficiencies	Strategic disinvestment with citizen safeguards
Revenue transparency	Parliamentary discussion on dividend usage

📝 Conclusion: Profits, People & Policy – Striking the Balance

The Centre’s increasing dependence on PSU dividends reflects a smart but short-term solution to fiscal gaps. But the government must ensure that:

• Citizens benefit, not just the exchequer,

• Long-term sustainability isn’t sacrificed for annual revenue,

• And dividend strategies are aligned with public welfare.

Aspirants must critically evaluate how India’s fiscal policies shape governance and citizen outcomes — because policy is not just about money, it's about people.

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