03 November 2004	Wednesday	19 Ramazan 1425

KARACHI, Nov 2: The government is likely to earn Rs49 billion on account of dividend from its investment in listed securities in FY'05, which would be 53 per cent or Rs17 billion more than its budgetary expectations of Rs32 billion.

Some analysts believe that it could be one of the major reasons that have restrained government from raising POL prices in the face of an unprecedented hike in the cost of international crude oil.

For all of FY'05, the state is said to be able to earn Rs46 billion in dividend, of which Pakistan Telecommunication Company Limited (PTCL) would contribute Rs22 billion and Oil and Gas Development Company Limited (OGDC) Rs18 billion; the two accounting for 93pc of government's dividend earnings. Pakistan Petroleum Limited (PPL) stands on the third slot, which would chip in 3.3 per cent share or Rs2.6bn. The remaining 3.3 per cent of dividend income to the government would accrue from its holdings in Mari Gas, PNSC, PSO and the Sui Twins.

"On very rudimentary ground, if we divide the CY04 amount of dividend income of Rs46 billion on monthly basis, the approximate sum for the income earning during the last six months (April to October '04) comes to around Rs 23 billion," says Humaira Zaheer, head of research at CapitalOne Equities. During the six months period, the government has had to bear loss of Rs20 billion on account of Petroleum Development Levy (PDL). The comfort level (difference between dividend earned and loss on PDL) therefore stands at Rs3 billion.

The analyst believes that if at any point in time the comfort level breaches during 2004 or 2005, government would have to think of an upward revision in POL prices. And some people fear that the revision could come as early as after Eid.

Mohammad Sohail, head of research at InvestCap takes an optimistic view. He observes that the problem though grave is not intractable. Quoting official sources, he maintains that government which is taking the brunt of the blow is looking at a huge loss of Rs70 billion in case it decides to keep the POL prices static by providing subsidy to the consumers. The break-up being non-receipt of Rs45 billion, which the government had budgeted as an income under PDL, and instead a loss of Rs25 billion on that account.

Sohail agrees that additional Rs20 billion in dividend may be earned by government from its stake in listed equities. With a little more effort, CBR could increase its collection by around Rs20 billion to Rs600 billion, from the budgeted target of Rs580 billion, says Sohail. That would add up to Rs40bn, still leaving a gapping hole of Rs30bn (Rs70 minus Rs40 billion). How would that be filled? The analyst maintains that through taxation measures and a tight leash on government expenditure, it was possible to bridge the gap.

The argument whether the government would be able to mitigate inflationary elements arising within the economy due to sky high crude oil prices - assuming the worst case scenario where the crude continues to rule at above $50 a barrel, without a crowning blow to the common man.

But for now, neither the results of US elections nor the price of oil dominates the investors' mind. The stock market continues its climb, rising by 85 points on Tuesday. A prominent stock broker said that much is made of the number of just 2 million retail investors in equities, from a population of 140 million. The government has also urged sock exchanges to try and increase the number of retail investors to 5 million. All in right direction but when it comes to growth in corporate profitability and a bullish stock market, both investor and non-investor in equities are the gainers - a reference to the static POL prices.

In the last three years, the market capitalization of the Karachi Stock Exchange has multiplied five times, raising the market value of all listed companies combined to Rs1,500 billion, from Rs300 billion at end 2001.

"The biggest beneficiary of this increase in wealth is the government," says the KSE chief, his reason being that the government owns almost half of the securities market.