Govt seeks Rs 19,000 crore dividend from oil companies to shore up finances: Report

The government is seeking Rs 19,000 crore in dividends from state oil companies to shore up finances, according to a report by The Economic Times.

A major chunk (nearly 60 per cent) of this dividend is expected to be paid by ONGC and Indian Oil. ONGC has been asked to pay a dividend of about Rs 6,500 crore, Indian Oil Rs 5,500 crore, BPCL Rs 2,500 crore, GAIL Rs 2,000 crore, Oil India Rs 1,500 crore and Engineers India Rs 1,000 crore, people aware of the development told the publication.

According to the report, the finance ministry has demanded that oil companies should maintain or increase the dividend payout this year.

This is a five per cent jump in dividends asked by the government compared to last year. The demand comes even as profits of these companies took a hit last year. As a result, oil companies are resisting the move and negotiating with the government to bring down these targets.

"What they are asking for is not in sync with the profits reported so far this year," a company executive told the publication. Except EIL (4%), all state oil companies have reported a drop in half-yearly profit: ONGC (-15.5%), Indian Oil (-59%), Oil India (-20%), BPCL (-21%) and Gail (-27%).

Executives believe that oil companies may have to borrow to pay high dividends. "Higher dividend outgo means you either cut down on your own planned spending or borrow more, which raises your finance cost," another executive told the newspaper.

The demand for higher dividend comes even as the government's stakes have fallen in these companies including ONGC (-5%), Indian Oil (-5%) and Oil India (-6.5%).