It has also proposed setting up high-level committees for monitoring of corporate mitigation efforts.
The Union Cabinet is expected to take up the issue shortly.
If considered favourably, it would not only mean subjecting corporate mitigation action to stiff monitoring but also an increased outgo towards afforestation.
"The idea is to stipulate stricter rules for mitigation by mining companies.
"Under the proposal, we have suggested increasing, or even doubling, the afforestation work a mining company will be asked to carry out, depending upon the extent of damage to the ecology. This would replace the no-go policy," said a senior official from the Commission.
The coal ministry wants a substantial dilution, at the least, of the no-go policy and the Planning Commission, too, has been advocating a rethink.
This new proposal is a part of the Commission's observations on the Cabinet note floated by the coal ministry to free 203 coal blocks and the associated end-use projects in critical infrastructure sectors from the no-go policy.
"Under the same proposal, we have also suggested setting up high-level monitoring committees to analyse the mitigation measures by companies," the official said.
The committees are proposed to be set up both at the central and the state level, and would have officials from the environment ministry and the end-use project ministry as members.
"These committees would also have representatives from the project developer and any other associated ministry or state department," he added.
Asked whether putting in place a stricter mitigation mechanism to replace the no-go policy would require amending the current laws, the official said: "Currently, afforestation measures by mining companies are guided by the recommendations of the Forest Advisory Committee under the Ministry of Environment and Forests.
"Putting in place a stricter mitigation regime would only require changing project-specific
No-go hits infra targets
While the no-go classification is indicative in nature, several existing and upcoming mines deemed critical for infrastructure growth in sectors such as power, steel and cement now fall in areas barred for mining.
As mentioned earlier, 203 coal blocks with combined reserves of 600 million tonnes and linked power projects of over 50,000 Mw capacity have been stuck due to the no-go criterion.
Coal India, the country's largest and state-owned miner, is one of many companies facing the environment heat.
Delay in getting environmental and forest clearances has affected its production plans in 14 projects of the 11th Plan, leading to loss of production of 45.64 million tonnes.
Coal India agrees that mining companies should be able to strike a balance between afforestation and mining.
The government should take into account a company's record of afforestation before including its mining projects in the no-go zone, it says.
"The question is that the intensity of afforestation has to match the extent of mining. We have done environment impact mitigation successfully in our coalfields.
"In Northern Coalfields Ltd, we have been able to achieve a 20 per cent increase in the number of rainfall days and a 10 per cent increase in the overall rainfall since we started operations there," a senior official from Coal India said.
A senior official from another power and mining company said strict monitoring norms are welcome.
"Mining companies are more than willing to ramp up afforestation efforts. Under the Mine Closure Plan, they are already mandated to do it. However, setting up monitoring committees to oversee mitigation efforts might not help," he said.