CIL to pay special dividend to mollify unions,bridge deficit

This step is aimed at mollifying trade unions who have refused to call off their nationwide strike scheduled from December 17-19.

CIL’s unions have been on a warpath against the government for proceeding to offload 5 per cent stake in the company,saying that it amounted to robbing CIL of its public sector character. The unions have indicated that they could re-consider their strike call if the company heeds Prime Minister Manmohan Singh’s advice and explores alternate options such as the special dividend and forsake disinvestment.

Singh had asked ministries like coal and heavy industries to explore alternate options as the choppy nature of markets currently could render the government’s disinvestment plans,aimed at bridging the fiscal deficit,futile.

The finance ministry has said it is open to the special dividend route for PSUs that are sitting on huge cash piles and have no immediate capital expenditure plans.

“While the government wants CIL to explore giving special dividend of 18-20 per cent,but the company’s board may not be keen beyond 15-16 per cent. A dividend of 18-20 per cent would have yielded close to Rs 12,000 crore,while 15-16 per cent would mobilise revenue of around Rs 10,000 crore,” a senior coal ministry official said.

When contacted,CIL chairman S Narsing Rao said the company was willing to consider the proposal,but the decision on the outgo would have to decided by the board.

Rao added that as a matter of policy,the highest dividend a PSU can pay in a given fiscal is capped at 30 per cent of the net profit,although it can be relaxed for special dividends.

During the last financial year,Coal India clocked a consolidated net profit of close to Rs 24,000 crore and paid dividend of around Rs 8,000 crore to the exchequer.

While the government netted a total dividend income of about Rs 30,000 crore from all PSUs during this period,it has similar expectations in 2013-14,Rao said.

Although,the government has not ruled out divestment,yet the coal ministry’s top brass say CIL’s production remaining below targeted level and huge outstanding dues of around Rs 8,000 crore from the power sector can lead to negative investor sentiments. This is why neither CIL nor the ministry is keen on a disinvestment exercise at least in this fiscal.