Government saw a drop in dividend income from public enterprises last fiscal yearThe Covid-19 pandemic and deferral of loan repayments affected profitability of banks, officials say.
The partially state-owned Agricultural Development Bank had paid the government Rs1.08 billion in dividend in the fiscal year 2019-20 but this dropped to Rs 640 million in the last fiscal year 2020-21.
Other public enterprises also reported decreased profits and paid smaller dividends to the government in the last fiscal year 2020-21 apparently due to the Covid-19 among other things, according to the Public Debt Management Office, which keeps records of dividends received by the government from public enterprises.
“The dividend received by the government dropped sharply in the last fiscal year. I don’t know the real reason but the Covid-19 pandemic might have affected the profitability of many state-owned enterprises,” said Deepak Gautam, undersecretary at the office.
In the case of the banks, the government and central bank’s policy of allowing pandemic-hit businesses to delay their loan instalment payments by upto a year also affected the profits of banks in the last fiscal year.
For example, many of the borrowers from the worst-affected sectors, which were supposed to pay the loan instalments by mid-July 2020 could pay their loan instalments by mid-July 2021 only. Similarly, borrowers from the moderately impacted sectors were allowed to delay their loan instalments payment by nine months until mid-April 2021 and those facing mild impact of the pandemic were allowed to delay their instalments payment by six months, until mid-January 2021, according to the monetary policy 2020-21.
“The main reason for the decline in the government’s dividend income is the pandemic, which hit the banks’ profits,” said Himalal Paudyal, spokesperson at the Agriculture Development Bank Limited. “We are continuing to provide extra Rs320 million to the government against its preference shares in the bank.”
He said that the deferral of loan payments affected the interest income and principal recovery in the last fiscal year affecting the bank’s profitability. However, the bank’s overall profit has slightly gone up in the last fiscal year. According to the financial statement of the bank for the last fiscal year, its overall profit has improved slightly but interest income has dropped.
Its net profit in the last fiscal year was Rs3.69 billion up from Rs3.33 billion in the previous fiscal year. But its interest income dropped to Rs14.51 billion in the last fiscal from Rs15.82 billion in the previous fiscal year.
The dividend income from the Rastriya Banijya Bank also went down to Rs315 million in the last fiscal year compared to Rs1.08 billion a year earlier, according to the Public Debt Management Office.
Its net profit in the last fiscal 2020-21 was Rs3.79 billion down from Rs4.37 billion in the previous fiscal year, according to its financial statement.
Likewise, Nepal Telecom, which has remained as one of the largest dividend contributors to the government over the last several years also paid a smaller dividend in the last fiscal year than a year earlier.
According to the Public Debt Management Office, the telecom giant paid the government Rs5.48 billion in dividend in the last fiscal year compared to Rs6.17 billion a year before.
Likewise, the dividend payment by the Nepal Stock Exchange also decreased to Rs87.9 million in the last fiscal year from Rs117.3 million a year before, and Nepal Oil Corporation’s slumped to Rs188.1 million from Rs5.15 billion.
The government received Rs29.8 million from the Butwal Power Company and Rs995 from Sajha Sewa in dividend payments in the last fiscal year, according to the Public Debt Management Office.
Despite huge investments by the government in public enterprises in the form of shares or loans, the returns have remained insignificant.
As of the fiscal year 2019-20, the government has invested a total of Rs519.55 billion in public enterprises including share investments worth Rs288.65 billion. The dividend received by the government in fiscal 2019-20 was just 4.88 percent of the total share investment.