The cabinet approved a policy on Tuesday that allows owners of coal mines that produce solely for their own use, known as "captive coal mines, to sell 25 percent of their output in the open market.

Share Market Live

NSE

The move seeks to "increase competitiveness" and address a tepid response to captive coal mine auctions, and would lead to higher revenue for the government, the government said in a statement.

The move comes months after India's cabinet approved a commercial coal mining policy, which enables companies to bid for mines from which they can sell all the coal in the open market.

Both moves could effectively end state control over coal mining in India.

Coal India accounts for over four-fifths of the country's coal output, and owners of captive coal mines are currently mandated to sell excess coal mined to the state-owned miner.

Despite cabinet approval, the government might not conduct auctions for commercial coal mining until after federal elections in May, a government official said.