Even though it is the world’s biggest coal producer, state-owned Coal India is unable to keep up with domestic demand.

It is set to build the 330km (206 mile) network.

Coal India will fund the rail line, which will be built by Indian Rail in five years.

This railway would make available 300 million tonnes of coal annually in the states of Odisha, Jharkhand and Chhattisgarh, Coal India chairman S. Narsing Rao said, according to Bloomberg.

"The railway line can eliminate the need for imports of thermal coal in five years," he said.

"Given the reserves we have, we should not have to depend on other countries for electricity generation."

India is the world’s second largest importer of coal. The US exported just over 1.7 million tons to India in the September quarter of 2012 – more than to France, Mexico or China.

Coal India’s production growth has stalled in the past three years, putting them at risk of collecting a penalty from the government for failure to guarantee supplies to utilities.

The company's proposal for the railway link has been in the works for more than six years, pending approval from the railway and environment ministries.

The government last year formed an inter-ministerial panel to push the project following an order from the Prime Minister Manmohan Singh.