CORRECTED - Government approves first ever coal block auction policy for private firms

(Corrects percentage figure in third paragraph to 80 pct from 60 pct)

NEW DELHI (Reuters) - The cabinet has approved auction of coal blocks to private companies, Coal Minister Sriprakash Jaiswal said on Tuesday, enabling the government to allot coal mining licences through competitive bidding for the first time.

Coal mining licences used to be allocated on recommendations of a panel of top bureaucrats across ministries, but the federal auditor censured the process last year saying it lacked "transparency" and probably deprived the government of billions of dollars of potential revenue between 2004 and 2011.

India relies on coal to fuel more than half of its power generation, but state-run monopoly Coal India Ltd , that accounts for around 80 percent of the country's output has been unable to dig out coal fast enough to feed the country's growing power demand. (Reporting by Nigam Prusty; writing by Malini Menon)