Ongoing US-Iran war could derail government's ₹75,000cr dividend goal
What's the story
The ongoing conflict in West Asia could keep global commodity prices high, affecting the profitability of state-run companies in India. This could jeopardize the government's target of a ₹75,000 crore dividend from central public sector enterprises (CPSEs) and other investments for this fiscal year. The petroleum sector is particularly vulnerable to these changes, prompting government vigilance over the evolving situation.
Economic impact
Brent crude prices surge amid ongoing situation
High oil prices could hurt state-run petroleum firms, which contributed a third of the government's dividend collection last fiscal year. Brent crude oil prices on April 10 were nearly 32% higher than pre-war levels. A senior finance ministry official warned that if the ceasefire collapses and the war continues for over a quarter, this could raise global prices of oil and other inputs, impacting CPSEs' profits this fiscal year.
Future considerations
No immediate plans to revise dividend target
The government is not planning to revise its 2026-27 dividend target yet, as it is too early in the fiscal year. However, internal calculations could be revisited in the second half if the war continues. The Bloomberg Commodity Index, which tracks price movements of 23 items, has risen nearly 9% since the conflict began on February 28.
Sectoral contributions
Petroleum sector biggest contributor to government's dividend collection
The petroleum sector was the biggest contributor to the government's dividend collection last fiscal year, with a payout of ₹25,798 crore. This was followed by sectors such as power (₹13,213 crore) and coal (₹10,876 crore). These three heavy commodity-exposed sectors contributed 64% of such dividends to the government last fiscal year.
Protective steps
Government reduced excise duty on petrol, diesel
On March 27, the government reduced excise duty by ₹10 per liter on petrol and diesel. The move was aimed at shielding consumers and oil-marketing companies from the shocks of the ongoing conflict. Last fiscal year, the government's combined disinvestment and asset monetization receipts reached ₹45,306 crore, exceeding the revised target of ₹33,847 crore but falling short of the budget estimate of ₹47,000 crore.