CHENNAI – India's Coal Minister Pralhad Joshi said on Wednesday the units of Coal India Ltd should be allowed to independently set fuel prices in a bid to increase competition and reduce the price of coal in the country.

State-run Coal India, the world's largest coal mining company by output, has seven units and accounts for more than four fifths of domestic production. It sets the price of various grades of coal in India after consultation with stakeholders.

"We agree that coal subsidiaries should discover their coal price independently so that there is competition and efficiency is driven," Joshi said in a statement.

"A beginning could be made so that one hand coal prices are freely discovered, and secondly efficiency gains accrue to consumers," he said.

Any decision does not look to be imminent, as the minister would need to liaise with the Coal India board. Coal India did not respond to a request seeking comment.

However, the country's Power Minister R K Singh also pushed on Wednesday for greater competition in the coal sector, which he said would help lower the price of electricity.

"I have spoken to the coal minister and both of us are clear in our minds that there should be competition in the coal sector," Singh said at a panel discussion conducted by the Economic Times newspaper.

"So if all these subsidiary companies are made independent and compete against each other, I see the price of coal coming down further. That will lead to further reduction in power prices," he said at the Economic Times Power Talks virtual conference.

India, the second largest producer, consumer and importer of coal, opened up mining to the private sector without imposing any restrictions on the end-use of the fuel for the first time earlier this year, in pursuit of higher efficiency and lower prices.

However, foreign investors shunned the auctions and only half the 38 mines auctioned received interest from two or more companies.