Senior Indian government officials tasked by the prime minister with reviewing energy security are recommending the break up of the country's coal monopoly, Coal India Ltd, within a year.
The move is likely to be resisted by powerful worker unions.
In a presentation seen by Reuters, the government officials say Coal India - the world's largest coal miner - would be more competitive and efficient if it was divided into seven companies.
The proposal, dated Nov 30, is expected to be presented to Prime Minister Narendra Modi soon, three government officials with direct knowledge of the situation said. They declined to be identified because the information has not been publicly released.
It is unclear whether the proposal will lead to the breakup of Coal India, which has a stock market capitalisation of $28 billion.
Calls to a Coal India spokesman went unanswered.
A source close to power and coal minister, Piyush Goyal, said the ministry would review its stand on Coal India depending on what the prime minister says.
Coal India enjoys a monopoly but critics say it is bloated and inefficient. Its output-per-man shift is estimated at one-eighth of Peabody Energy, the world's largest private coal producer that filed for bankruptcy protection this year.
Under Modi's government though, production has risen sharply as environmental and other clearances to develop mines have been fast-tracked. The company is also spending billions of dollars on buying modern machinery to raise productivity.
Modi had been exploring a breakup of Coal India even before taking office, Reuters reported in 2014, but the government put the idea on the back burner following protests by powerful worker unions.
A new proposal to break up the monopoly is likely to be met again with strong resistance from unions, who fear such a move will lead to job cuts and outsourcing of work to private companies.
"What happens is that once a big company is broken down, it is easier to control the smaller ones," said D.D. Ramanandan of the All India Coal Workers' Federation. "But if it happens, we will oppose it. We will oppose it through all ways possible, including strike."
In late October, Modi set up 10 groups of senior bureaucrats to "undertake a critical review of the work done by the union government in the respective sectors that they will be studying".
The proposal to break up Coal India comes from one of these groups - nine top bureaucrats, including ones from the ministries of coal, power, oil and mines. They were asked to come up with policy proposals to promote energy security and the environment.
The group also recommended ways to accelerate the adoption of electric vehicles, including by supporting the construction of charging infrastructure in fuel stations, shopping malls, airports and government offices.