(Adds source comments) MELBOURNE, Aug 4 (Reuters) - Australia's...

(Adds source comments)

MELBOURNE, Aug 4 (Reuters) - Australia's competition watchdog said on Thursday that Aurizon Holdings (AZJ) has proposed to buy Glencore Plc's coal rail business in the Hunter Valley in New South Wales and will rule on the bid by September 29.

Glencore put the business up for sale earlier this year, hoping to fetch as much as A$1.5 billion ($1.1 billion) and has attracted interest from a number of rail transporters, including Aurizon and Genesee & Wyoming Inc , industry sources have said.

"The ACCC's investigation is focused on the impact on competition," the Australian Competition and Consumer Commission said in a statement, seeking comments on whether GRail's coal haulage volumes could be contested by other rail providers, and whether GRail has competed with other providers.

GRail is the third-largest coal haulage business in Australia, behind Aurizon's network and Asciano's (AIO) Pacific National.

The business, which includes locomotives, wagons and associated equipment, generated about $100 million in earnings before interest, tax, depreciation and amortisation last year.

"We were hoping to identify a buyer by the third quarter and things are broadly on track," a person familiar with the pace of the sale process told Reuters last week.

GRail is designed to be expanded to serve other Hunter Valley coal miners as well as other commodity producers, hence its appeal to Aurizon, Genesee & Wyoming, and Pacific National. ($1 = 1.3153 Australian dollars)