January 14, 2014 / 1:27 PM / in 4 years

Cash-rich Coal India to pay $3 billion as interim dividend

A worker sits on a truck being loaded with coal at a railway coal yard on the outskirts of Ahmedabad November 25, 2013. REUTERS/Amit Dave/Files

MUMBAI (Reuters) - State-run Coal India(COAL.NS) said on Tuesday it will pay an interim dividend of 29 rupees a share, or 183.2 billion rupees, in the current fiscal year that ends on March 31, in a move that will help the cash-starved government narrow its fiscal deficit.

The government’s 90 percent shareholding in the company will fetch it about $2.7 billion.

The Kolkata-based company, the world’s largest coal miner by output, had paid a total dividend of 14 rupees a share in the previous fiscal year.

India’s slowing economy and rising subsidies on food and fuels have pushed the government into a corner, with fiscal deficit for the April-November period rising to $82.3 billion, or nearly 94 percent of the full-year target.

New Delhi aimed to control its budget deficit in part by raising $6.4 billion through stake sales in state companies, but disagreements among ministries and a depreciation in the rupee have complicated the timing of several issues.

So far this fiscal year, the government has raised about $500 million through this route.

Delayed issues include plans to sell 5 percent of Coal India and 10 percent of Indian Oil Corp Ltd (IOC.NS), that would have totally earned it up to $2.3 billion.

Coal India, which accounts for 80 percent of India’s coal output, has missed production targets for several years and its growth hobbled by a lack of investments on modernisation and delayed approvals of its mining projects.

The state firm held cash reserves of 642.7 billion rupees at September-end, the second among Indian corporates after energy major Reliance Industries (RELI.NS).

Reporting by Prashant Mehra; Editing by Sunil Nair

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