New Delhi: As of November, the capex of PSU oil companies put together stands at Rs 46,303 crore, less than 50 per cent of the annual target of Rs 98,522 crore. The government has asked companies to complete at least 75 per cent of capex till the end of December quarter. But this looks highly unlikely now pushing the case for higher dividend payout.
In meetings with PSUs, Finance Minister Nirmala Sitharaman had stressed on the need for PSUs to step up investment during the time of the pandemic to boost overall sentiments and kickstart investment climate in the country. She had specifically urged companies to complete at least 75 per cent of capex target by December-end and more than 100 per cent by March.
“It is a double whammy for PSUs now. They have to cough up more either through investments or through payment of additional dividends. It should also be seen that the companies are finding it difficult to meet capex targets given financial and project implementation constraints. Covid has severely dented demand and slowed project implementation. Consequently, there is already a strain on their resources that would get heightened as additional dividend would have to be paid,” said a top official of a PSU, asking not to be named.
While almost all PSUs are facing delays and difficulties in stepping up the gas and increasing investments, the situation among companies in the oil and gas sector looks worse. Slow demand conditions in early part of the year resulted in slowing of several capex plans. Though the situation has improved from November onwards, still its a long way to go for normalcy to return in the sector.
For the government, oil sector PSUs are also set to make big inventory gains due to firming up of crude prices, and hence they are being looked at for higher interim dividend or special dividend and a few may also be considered for share buyback depending on market conditions.