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After oil companies such as ONGC and Oil India, it’s the turn of Coal India Ltd (CIL) to play a bigger role in helping the Union Government in meeting its budgetary targets.

On Tuesday, the CIL board decided to part with nearly INR 18,317 crore as special dividend to its shareholders. The Centre, by virtue of its 90 per cent ownership in the listed company, will get around INR 16,486 crore.

Paid at INR 29 a share, the total outgo for 2013-14 is more than double the payout of INR 8,843 crore at INR 14 a share in the previous fiscal. This, coupled with its huge contributions (around INR 36,000 crore in 2012-13) towards the Central and State government exchequers in the form of taxes, royalties and cess, will make CIL a front runner in powering the Indian economy.

The decision to fork out a special dividend was taken in the first week of December, when the Centre dropped its 5 per cent disinvestment agenda in CIL due to objection from labour unions.

After many years, the company reported a 10 per cent decline in net profit in the first half of this fiscal due to Government policies that forced it to escalate supplies to the power sector at less than the average price (which itself is half the global coal prices) and, lower returns from e-auction.

But the Government had a logic in forcing the CIL board to fork out higher dividend. CIL is sitting on INR 62,000 crore cash reserve. It’s a tad lower than CIL’s annual turnover of INR 68,000 crore and nearly three times the annual capital expenditure.

But, according to the stock market, the ever-increasing booty of unutilised cash was a drag on the company’s share price.

Investors were keen that CIL should find a formula to spend the money. The board had little option to sidestep this logic. And, the company’s share price that was ruling around INR 270 a couple of weeks ago has now shot up to INR 295.

Source-On Request