India's monopolistic position has not helped," Ahluwalia said on Thursday.
Former prime minister Indira Gandhi had nationalised coal in 1973 by setting up Coal India Limited, a holding company for all coal reserves in India, with a fear of mafia taking over the important mineral produce.
Since then, the government has allowed minor private participation in coal sector.
In mid-1990s, the government allowed private companies to mine for captive purposes only after the linkage for iron and steel, power and cements sectors was established. Still over 95% of coal mines are with Coal India or its subsidiaries.
The plan panel has said that 23,000 MW of power capacity added in the 11th Five Year Plan cannot be utilised because of absence of coal linkages. There is about 122 million tonne gap between the demand and supply of coal by Coal India.
Ahluwalia said that he believes that coal should be denationalised and private players should be allowed to commercially exploit the natural resource.
"If private players are allowed in other valuable natural resources such as gas and petrol, why not in coal?" he asked.
Coal is the only nationalized fossil fuel and source for about 70% of India's electricity need.
"I strongly support the move to de-nationalize coal mining in India as the move will usher competition and bring in the much needed latest mining technology," said Arvind Mahajan, partner and head for energy-infrastructure at advisory firm KPMG India.
Mahajan added that the de-nationalisation could also attract global mining firms into coal mining in India.
Critics of the proposal say that it would lead to huge increase in coal prices resulting in higher electricity cost for common person.
High energy cost would also add to inflation.
Experts cautioned that coal block allocation to private companies delinking it from captive usage may open up possibilities of speculative trading in the fuel.
The Plan Panel, however, says that Coal India has not been mine enough from its 475 coal mines despite the company being Rs. 26,000 crore cash surplus.
The coal ministry officials, however, blame the environment ministry saying environment approval for 128 coal blocks are pending with the ministry.
With inputs from Vivek Sinha