"The power sector should be encouraged to rely more on coal for new capacities, which may lead to some reduction in the demand of natural gas," the Prime Minister's Officer wrote in a letter to the Petroleum and Natural Gas Ministry.

The letter follows a report of a select group formed to look into the availability of gas after 2009, The Financial Express newspaper reported Tuesday.

India's Power Ministry set a target of capacity addition of 78,577 megawatts in the 11th five-year plan that began this April.

The letter said if power utilities switch to coal-based projects, the fate of projects in the pipeline will hang in the balance.

The states of Maharashtra, Gujarat and Andhra Pradesh have together planned 10,000 MW gas-based power projects in the next five years.

India's power and fertilizer sectors are the worst affected by the gas shortage. According to the Petroleum and Natural Gas Ministry, India would require around 180 million standard cubic meters per day of gas in 2007-08.

The ministry's estimate says the supply will be around 81 mmscmd, adding the shortage would persist until 2012.