A reduction in coal imports by increasing domestic production would help in bridging the current account deficit, according to Planning Commission member B K Chaturvedi.
Despite the country having substantial coal reserves, demand for the dry fuel is much higher than domestic production resulting in increased imports.
According to Chaturvedi, the domestic production of coal has to be increased to meet the demand of various segments, especially power sector.
"The government is very keen that domestic production (of coal) improves. The policy is to maximise production of coal so that imports of coal is reduced.
"And if they (imports of coal) reduced to that extent, your CAD will improve," he told PTI.
Current Account Deficit, which indicates imports of goods services and transfer are higher than their exports, touched 4.8 per cent (or USD 88.2 billion) of country's Gross Domestic Product (GDP) in 2012-13 period.
In the current fiscal, the government is making efforts to contain the CAD at 3.7 per cent (or USD 70 billion) of GDP.
Acute coal shortages in the country is hurting electricity generation and many power producers are dependent on imported fuel to fire their plants.
Domestic coal demand touched 772.84 million tonnes (MT) during 2012-13 period whereas production was at 557.60 MT.
India had to import 113 MT of coal during the April 2012 - January 2013 period, on top of a rise of 47 per cent witnessed during the previous year, as per the Reserve Bank of India (RBI).
Meanwhile, Chaturvedi emphasised that the government policy is very clear on increasing domestic coal output to cater to power generation needs but there are issues to be sorted out.
"The question is of effective implementation of some of these policies with regard to environmental clearances and land acquisition etc...," he said.
Further, he suggested that the efficiency of power plants need to be improved so that less coal could be consumed for generating electricity.
Import of coal has steadily increased from 20.93 MT during 2000-01 to 102.85 MT during 2011-12, as per information available with the Central Statistics Office.
In June, the Prime Minister's Economic Advisory Council (PMEAC) had said that domestic coal production should be ramped up to lower reliance on imports.
"In the recent period we have seen that the coal import into the country has increased almost by 40 percent. It almost touched USD 18 billion, which is twice the value of the import a few years ago," PMEAC Chairman C Rangarajan had said.
Going by estimates, the demand for coal is projected to be around 980 MT in the 12th Five-Year Plan period (2012-17) whereas domestic production is pegged at around 795 MT in the terminal year (2016-17). The gap would have to be met by way of imports.
Further, the dominance of coal is expected to continue in the power sector. Nearly 60 per cent of country's electricity generation is from coal-based plants. At the end of June, coal-based power generation capacity accounted for 1,32,288 MW of the total capacity of more than 2,25,793 MW.
