* China set to beat steel, coal targets in five-year plan

* Underscores effort to streamline bloated sectors, clean air

* NDRC report comes as annual Parliament starts on Monday

By Muyu Xu and Tom Daly

BEIJING, March 5 (Reuters) - China's state planner pledged on Monday to cut more steel and coal production capacity this year, putting the country on track to beat its long-term targets, as Beijing reinforced its vow to beat smog and make "skies blue again".

At the opening of the annual meeting of parliament, the National Development and Reform Commission (NDRC) said in a work report it will reduce steel capacity by around 30 million tonnes and coal output by about 150 million tonnes this year.

The cuts would put the world's top steel maker and coal miner on track to meet its 2020 targets in the government's five-year plan about two years ahead of schedule.

The cutbacks came as Premier Li Keqiang said in prepared remarks that the government would consolidate gains made in the country's fight against pollution to defend the "blue of our skies.

China planned to cut emissions of sulphur dioxide and nitrogen oxide, major sources of hazardous airborne particles known as PM2.5, by 3 percent this year, Li said. That's the same as the 2017 targets, which were easily exceeded.

Elsewhere, the NDRC report largely reiterated existing goals, underscoring China's years-long determination to crack down on pollution, cut back supply in bloated heavy industries and upgrade fossil-fuel energy sources by cutting coal use in favour of cleaner energy.

In both steel and coal, it has focused on shutting outdated, more polluting plants, while bringing on more efficient operations with lower emissions to ensure supply. Steel output hit a record last year, while coal production also rose.

The 2018 cuts were higher than expected, said Zhang Min, a coal market analyst at China Sublime Information Group.

"Setting a high target this year showed the government is not slowing down the pace of reform for the two industries," said Zhang.

AHEAD OF LONG-TERM TARGETS

Cutting 30 million tonnes of steel capacity in 2018 will bring the total reduction over three years to 145 million tonnes. That will put China well ahead of a plan to reduce excess by up to 150 million tonnes by 2018 to 2020.

Steel rebar prices dipped 0.7 percent in morning trade, as the news was largely priced in after Beijing flagged last month that it expected to meet the objective in 2018.

A cut of 150 million tonnes of coal this year would bring the total cut since the start of 2016 to 590 million tonnes, well ahead of the five-year plan by the world's top coal consumer to slash 500 million tonnes of coal capacity by 2020.