Coal India Ltd., the world's largest producer, is now more keen in using a proposed sovereign fund to buy mines abroad to supply the increasing local demand, a government official said.

Alok Perti, additional secretary to the coal ministry, said in an interview with Bloomberg that the country will need to import at least 50 million metric tons of coal from abroad in 2017 to bolster local production.

"We have planned this keeping in mind the nation's energy security as we can see clearly that the demand-supply gap will continue to rise," said Perti, whose ministry controls Coal India. "It is critical also because we are competing with China for energy assets."

State-owned Coal India joins the oil ministry to partake of funds from the nation's $277 billion foreign-exchange reserves to bid for energy assets. India is closely competing with China for energy sources as they are Asia's top two fastest-growing major economies jostle for global resources.