India should split the seven units of state-controlled Coal India Ltd into independent companies to make it more competitive, the government's policy think-tank said on Tuesday in a draft of a new energy policy.
About 70 percent of India's power generation is fired by coal. The country is the world's third-largest producer and third-biggest importer of coal, which the government wants to change by boosting local coal production.
Fresh coal production should come from private sector mines, the government think-tank NITI Aayog said, adding that the move called for reforms in allocating coal blocks to independent companies specialised in coal mining.
Coal India was not available for comment after its regular business hours.
Reuters reported in December that senior Indian government officials, tasked by Prime Minister Narendra Modi with reviewing energy security, were recommending the break up of the world's largest coal miner within a year.
Attempts to break up the world's biggest coal miner could expect resistance from powerful unions representing the firm's more than 350,000 employees. The government backed down from a similar proposal in the face of union protests in 2014.
One of the unions, which is close to Prime Minister Narendra Modi's party, is against the move and says it has the support of about half of Coal India's workers.
"We are opposing the recommendations made by NITI Aayog," Baij Nath Rai, president of Bharatiya Mazdoor Sangh, told Reuters by telephone.
Coal India, the country's second-biggest employer, is often criticized for being bloated and inefficient. Its output-per-man shift is estimated at one-eighth of Peabody Energy, the world's largest private coal producer.