The Telegraph
Wednesday , January 15 , 2014
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CIL obliges govt with fat payout

Calcutta, Jan. 14: Coal India has declared a whopping 290 per cent interim dividend that will make the central government richer by over Rs 19,500 crore by way of payout and taxes.

The Centre, which is in a hurry to plug the divestment shortfall, has been coaxing cash-rich public sector units to either pay special dividends or go for a share buyback to help the government meet its fiscal deficit target.

Coal India, which is sitting on huge cash reserves of Rs 62,000 crore, is the first state-run company to oblige the government with a hefty payout cheque.

The PSU said on Tuesday that it would pay an interim dividend of Rs 29 a share, or Rs 18,320 crore, in the year that ends on March 31.

The government’s 90 percent shareholding in the company will fetch it about Rs 16,485.71 crore. In addition, a sum of Rs 3,113.05 crore by way of dividend distribution tax will take the government’s gain to Rs 19,598.76 crore.

The dividend will be disbursed from January 25, 2014 to shareholders who hold CIL shares as on January 20, 2014.

“We have approved a dividend of Rs 29 per share of face value of Rs 10 each as recommended by the audit committee of company,” said S. Narsing Rao, chairman of CIL, after the board meeting.

The Calcutta-based company, the world’s largest coal miner by output and second in cash reserves among Indian corporate houses after Reliance Industries, had paid a total dividend of Rs 14 a share in the previous financial year.

Coal India has a capital expenditure outlay of about Rs 5,000 crore for 2013-14.

The company’s shares were today trading at Rs 289.90 apiece at close, down 0.12 per cent over the previous close.

Last week, top PSU chiefs, who met finance ministry officials, were told to pay a higher dividend if they could not give proof of having spent a significant part of their reserves on capital expansion.

Officials said Coal India could be the biggest contributor, while iron ore miner NMDC is expected to chip in with Rs 2000-2,500 crore and ONGC with Rs 5,000-7,000 crore. Bhel may be asked to pay out Rs 2,500 crore.

During the last financial year, the government had received Rs 55,443 crore as dividend and profit. The target in the current year is Rs 73,866 crore. Of this, it had expected to garner Rs 29,870 crore as dividend alone from PSUs.

Coal India, which accounts for 80 per cent of India’s coal output, has missed production targets for several years and its growth suffered because of lack of investments in modernisation and delayed approvals of its mining projects.

Divestment plan

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 per cent of the full-year target.

New Delhi aimed to control its budget deficit in part by raising Rs 40,000 crore through stake sales in state units, but disagreements among ministries and a depreciation in the rupee have complicated the timing of several issues. Delayed issues include plans to sell 5 per cent of Coal India and 10 per cent of IOC.

So far this financial year, the government has raised Rs 3,000 crore through the divesment route. The government hopes to rake in Rs 2,000 crore from NHPC’s buyback. Besides, it has drawn up a road map to raise Rs 13,000 crore from stake sales in IOC, Bhel, Engineers India, HAL and issuance of PSU exchange traded funds in the remaining months of this fiscal.

Today attorney-general G.E. Vahanvati cleared the way for the government to offload its residual stake in Hindustan Zinc Ltd (HZL) through auction, saying it is no longer a public sector company, official sources said.

The government’s 29.5 per cent stake in HZL is worth Rs 16,000 crore at current market valuation. The value is expected to be higher in the auction as HZL is sitting on cash reserves of Rs 23,632 crore and is the most profitable company in the Vedanta group stable.

The government has been working to sell its residual stakes in several private companies, including Hindustan Zinc, Balco and Axis Bank.