Description

Copyright infringement not intended

Picture Courtesy: https://www.moneycontrol.com/news/business/markets/govt-announces-changes-in-capital-restructuring-norms-by-cpses-including-share-buybacks-and-dividends-12869941.html

Context:

The Union Finance Ministry through the Department of Investment and Capital Asset Management (DIPAM) has issued revised guidelines that require Central Public Sector Enterprises (CPSEs) to pay an annual dividend.

Details

The previous 2016 guidelines required CPSEs to pay 30% of profit after tax (PAT) or 5% of net worth, whichever was higher. The revised guidelines now specify a minimum of 30% of net profit or 4% of net worth, whichever is greater. Financial sector CPSEs were not explicitly mentioned in the 2016 guidelines, but they now have separate provisions.

CPSEs are government-owned businesses in which the Union or state governments, or both, own a majority stake (51% or more).

Which entities are exempt from the revised guidelines?

Section 8 of the Companies Act prohibits public sector banks, public sector insurance companies, and corporate bodies from distributing profits to their members, so the revised guidelines do not apply to them.

Department of Investment and Capital Asset Management (DIPAM)

The Department of Disinvestment was renamed as the Department of Investment and Public Asset Management (DIPAM) in 2016.

It works under the Ministry of Finance.

It manages all aspects of the sale of Central Government equity through various methods, such as offer for sale, private placement, or any other mode in the former Central Public Sector Undertakings (CPSUs). It also manages the Central Government's equity investments and disinvestments in CPSUs.

DIPAM's Strategic Disinvestment strategy focuses on selling a significant portion of government equity in public sector enterprises to private entities to reduce the government's stake while increasing enterprise management efficiency.

Must Read Articles:

ASSET MONETIZATION PROGRAMME

NATIONAL LAND MONETISATION CORPORATION

Source:

The Hindu

PRACTICE QUESTION

Q.Consider the following statements:

1. The Asset Monetization Program of the Government aims at unlocking the value of non-core assets.

2. The National Land Monetization Corporation (NLMC) is a 100% Government of India owned company

Which of the above statements is/are correct?

A) 1 only

B) 2 only

C) Both 1 and 2

D) Neither 1 nor 2

Answer: C

Explanation:

Statement 1 is correct:

The Government's Asset Monetization Program aims to unlock the value of non-core assets (primarily land, buildings, and other immovable properties) across India that are surplus, un-used, or under-utilized, with no clear and present plan for optimal use in the near future.

Statement 2 is correct:

National Land Monetization Corporation (NLMC), a 100% government-owned company was established in 2022 under the administrative control of the Department of Public Enterprises, Ministry of Finance, to monetize non-core assets of CPSEs and other government agencies.