THIRUVANANTHAPURAM: The Finance Department has viewed KSIDC’s failure to pay dividend to the Kerala government seriously and has instructed the Corporation to comply with the directive regarding dividend payments.
As per a government order issued in 2023, companies that earn profit after tax (PAT) above Rs50 crore are required to pay a minimum dividend of 20 per cent to the government, the 100 per cent owner of KSIDC.
Accirding to an informed source, KSIDC had given dividend to goverment, which owns 100 per cent of KSIDC, in the earlier years.
(Why is BBN discussing FY23 and earlier annual reports? As of now, the latest available annual reports for Kerala Public Sector Undertakings (PSUs) pertain to the financial year 2023 and prior)
KSIDC FY23 profit at Rs64.73cr
KSIDC has reported a net profit or profit after tax (PAT) of Rs64.73 crore for the financial year 2022-23 (FY23) and Rs Rs54.93 crore for the previous year – above the threshold of Rs50 crore set for dividend payment.
“But company (KSIDC) has not paid dividend to the government from the financial year FY2018-19 to 2022-23. Board (KSIDC) may examine this non-compliance of government direction and take steps to declare dividend as per rules,” the Finance Department has stated.
KSIDC’s defence for not paying
However, KSIDC has put up its defence for not paying the dividend to the government.
The KSIDC management explained that the corporation operates with the primary objective of fostering industrial development within the state. “Over the years, we have been dedicated to facilitating the growth of industries by providing financial assistance and other
support mechanisms (to the industries), and one of our key strategies involves utilising surplus funds to disburse loans to industries at reduced rates,” it said in its explanation note.
Stating that this approach has been instrumental in encouraging entrepreneurship, fostering innovation and driving economic growth in Kerala, KSIDC management argued that the declaration of dividends to the government, (as per the said Government Order) would significantly impact the liquidity of KSIDC.
“Given our commitment to supporting industries through accessible financing, utilisation of funds towards dividend payments would constrain our ability to offer financial assistance to SME’s at affordable interest rates,” the KSIDC management further argued.
Dividends too ambitious?
Speaking to businessbenchmark.news, a top economist based in Thiruvananthapuram said, the government receiving dividends from public sector undertakings (PSUs) such as KSIDC is likely to remain a pipe dream at least for the foreseeable future.
Most state-level public enterprises (SLPEs) have proved to be sheer money guzzlers for long.
While the aggregate profit earned by these companies for the financial year 2021-22 (FY22) amounted to Rs1,570 crore, the aggregate loss reported by these SLPEs at Rs3,289 crore has dwarfed the profit, leaving the bottom line at a net loss to the tune of Rs1,719 crore for FY22.
Out of the scores of government entities, only three PSUs declared a total dividend of Rs3.23 crore during the year 2021-22.
The return in the form of dividends on an aggregate investment of Rs2,344.07 crore in 51 profit earning PSUs, works out a meagre 0.06 per cent return on investment.
