Shares of Coal India
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.
Coal India shares ended down 5.5 percent at 302.30 rupees after falling as low as 299.95 rupees, their lowest since October 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 rupees 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
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.