A draft paper by the government's commission on energy for India's 5-year plan for 2012-17 warned of "an urgent need to take effective measures to step up coal production," Press Trust of India reports.
If domestic production doesn't increase by at least 7.5 percent a year, the commission said, imports could soar higher than the estimated amount.
Although India has the fifth-largest coal reserves in the world, much of it is under forests and so mining projects face fierce environmental scrutiny.
India's total demand for coal increased about 8 percent during the last 5-year plan, while domestic production grew 4.61 percent.
Coal India, which is 90 percent owned by the government and provides 80 percent of the country's coal needs, separately announced Tuesday that it had set a production target of 464 million tons for 2012-13.
But Coal India's production targets aren't necessarily reliable.
The company's 2011-12 original output target, 447 million tons, was later scaled down to 435.84 million tons.
India's rising coal import requirements pose a particular challenge, India's commission on energy warned, given that international coal trade was estimated at 1 billion tons a year against a total global consumption of 6 billion tons a year.
The commission also said international prices of coal are likely to remain high because of new taxes imposed by several coal-producing countries, including Australia and Indonesia.
Indian Coal Minister Sriprakash Jaiswal on Monday said that states had agreed to price-pooling between domestic and imported coal, The Hindu newspaper reports.
While acknowledging that price-pooling is a complicated mechanism never used before in India, Jaiswal said the ministry would implement it "if it is good for the country."
Jaiswal said his ministry is also pushing for an extension of environmental approvals for 13-14 coal blocks, in which mining was already being carried out.
"We have told the Environment Ministry that there is no need for the entire process to take place. These are not new blocks. Mining is already being done to that extent where clearances have been issued. Now, we want to expand them," Jaiswal said.
Coal accounts for about 67 percent of total energy consumption in India.
As India's energy demand outpaces supply, power outages and blackouts are becoming more frequent and nearly 400 million people, about one-third of India's population, have no access to electricity.