In a controversial order, the Gujarat government has asked all profit-making public sector enterprises (PSEs) in the state to contribute up to 30% of their annual profit before tax to Gujarat Socio-Economic Development Society (GSEDS), set up to support weaker sections of society.
The request has had a cascading effect on several PSEs that have lost Rs 1,336 crore in terms of market cap since the Wednesday directive.
Confirming the Gujarat government’s decision, state commissioner of Bureau of Public Sector Enterprises, Arvind Agarwal, told TOI , ‘‘Because these companies earn good profits, their contribution to Gujarat’s socio-economic development will help the state achieve its social objectives.’’
But in the last two trading sessions alone, the market capitalisation of Gujarat Mineral Development Corp (GMDC), Gujarat Alkalies and Chemicals (GACL), Gujarat State Fertlizers and Chemicals (GSFC), Gujarat Narmada Valley Fertilisers Corp (GNFC), Gujarat Industrial Power Corp (GIPCL) and Gujarat State Petronet Limited (GSPL) has fallen by Rs 1,336 crore.
And the value of government’s holding in these companies got shaved off by Rs 721 crore.
GMDC, which has declared in its annual report that it would contribute nearly Rs 123 crore for social causes, continued to fall sharply, down by 17% in two days since the decision. While the managing directors of the six listed PSEs have made a strong representation to the state government that the move would erode the rating of PSEs, the government has remained undeterred in its pursuit to milk the profit-making PSEs for its social goals.
While bureaucrats manning these PSEs are disturbed by the slide in the stocks, a government spokesperson told TOI that ‘‘there’s no question of going back on this.’’
‘‘It’s a retrograde step from the capital market point of view. A better way to implement CSR is to ask PSEs to increase the dividend payouts so that the Gujarat government receives higher sum to donate to any society of its choice,’’ said V K Sharma, the head of Anagram Securities.
