UPDATE 1-Coal India shares hit 5-month low on govt stake sale plan
* Govt aims to sell 10 pct stake next fiscal year - sources
* Indian Oil, Engineers India among divestment targets for 2013/14
* Coal India shares slump 5.5 pct in Mumbai trade (Adds details, confirmation from govt sources)
MUMBAI, March 18 (Reuters) - Shares of Coal India, the world's largest coal miner by output, tumbled to a more than five-month low on Monday after government sources said the Indian government was planning to sell a 10 percent stake in the company.
The government plans to sell the stake in the next fiscal year, which starts on April 1, although it has not finalised a time frame or method for the sale, said the sources, who declined to be identified because they are not authorised to speak to news media.
As of 12:30 p.m. (0700 GMT), Coal India shares were down 5.5 percent at 302.40 rupees after falling as low as 299.95 rupees, their lowest since Oct. 5. The Economic Times, which first reported the news, said the government was "quickly pushing ahead" with the sale.
Coal India officials could not immediately be reached for comment.
At the current price, a 10 percent sale in the company could fetch the government about $3.5 billion.
The stake sale would be part of the government's efforts to raise 400 billion Indian rupees ($7.4 billion) in 2013/14 through stake sales in state companies to cut down on the fiscal deficit.
New Delhi has raised $4.1 billion from divestments so far this fiscal year, and could improve on that if a planned share auction in steelmaker SAIL goes ahead this month.
For the next fiscal year, the government's divestment plans include stake sales in top state refiner Indian Oil Corp and a follow-on public offer in Engineers India Ltd .
The Coal India sale may take place through a follow-on public offer or a share auction, but a decision will be taken later, said one of the sources. He said the actual offer may be months away as several related issues need to be resolved first.
UK-based shareholder The Children's Investment Fund has demanded the state miner raise coal prices to international levels, and issue higher dividends. It has filed lawsuits against the company and its directors.
Coal India is also expected to face resistance from workers' unions if the government decides to cut its stake in the company.
Coal India debuted on stock markets in 2010 after a record $3.4 billion initial public offering. ($1 = 54.05 rupees) (Reporting by Rafael Nam and Prashant Mehra; Editing by Chris Gallagher)