The finance ministry will lean heavily on returns from public sector undertakings (PSUs) to make up for an expected tax revenue shortfall this fiscal, as a slump in economic growth risks the government overshooting its fiscal deficit target.
A Reuters report said the government expects to raise as much as Rs140,000 crore (about $21,86 billion) from 12 PSUs by way of dividends and share buybacks.
The government's decision follows a survey carried out of the financial health of 14 major state-run firms, including mining firm NMDC Ltd and trading firm MMTC Ltd, according to the report that quoted a government document.
According to the report, the finance ministry has asked the 12 companies to pay dividends between 30 per cent and 100 per cent of their 2016-17 or 2017-18 net profit, share buybacks or bonus shares.
The money is needed to save the central government's finances that have seen an unprecedented slump that could lead to deficit reaching new heights and putting further pressure on an already faltering economic growth that has hit a three-year low in the first quarter of the 2017-18 fiscal.
The central government's budget deficit has already reached Rs4,99, 000 crore, which is more than 91 per cent of its fiscal year target.
The government, however, hopes to stick to its budget target of 3.2 per cent of GDP for the current fiscal, the report quoted Surjit Bhalla, a member of the prime minister's economic advisory council, as saying.
Besides lower-than-expected GST collections, the government's revenues have also been hit by a sharply lower dividend from the Reserve bank of India (RBI).
Most PSUS are reluctant to make huge payouts as it could drain the companies of free cash that is needed both for investments and working capital and put pressure on their functioning.
Report says the government has asked MMTC to pay Rs30 crore as dividend and issue bonus shares for 2016-17..
"The committee noted that MMTC's defined reserves and surplus is more than 10 times of its paid-up equity share capital," the document said.
Three unlisted companies from defence and railways were also asked to pay a maximum 100 per cent of their net profit as dividend, according to the report.