The 214 coal blocks, which will be auctioned soon, were cancelled by the Supreme Court in September. The court said the process used to assign coal licences for nearly two decades by successive governments had been arbitrary and illegal.

Mines would be put for e-auction for the first time. So far the government has only allowed the e-auction of coal and not mines.

As far as the private sector is concerned, the actual users of coal in the cement, steel and power sectors who apply for a certain number of coal mines will be put in the pool and there would be an e-auction, Mr Jaitley said.

The finance minister said requirements of the central and state governments would be met and coal mines would be allocated to PSUs like NTPC or state electricity boards.

Mr Jaitley said the entire process of re-allocation would be completed within three to four months.

The finance minister said the proceeds of the auctions would go entirely to the state governments where the mines are located. States in eastern India like Jharkhand, West Bengal and Chhattisgarh will be the biggest beneficiaries, he added.

Once these mines start working, lakhs of labourers will get employed and bank capital will be freed up, Mr Jaitley said. He also said that the expeditious disposal of the process will be a huge boost to the manufacturing sector.

The government did not announce big ticket reform to end the monopoly of Coal India, which has been unable to meet its production target, turning India into the third largest coal importer despite having the fifth largest coal reserves in the world.

The government does not intend to impact the structure of the state-run Coal India, the finance minister said.