CCEA approves revised SHAKTI policy for coal allocation 

The current revision of the SHAKTI policy, enriched with innovative features, is set to significantly enhance its scope and impact across the power sector.

 In a meeting chaired by the PM Narendra Modi held recently Cabinet Committee on Economic Affairs (CCEA) approved the Revised SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) Policy for Coal Allocation to Power Sector. The Revised SHAKTI Policy adds to the series of coal sector reforms being undertaken by the Government.      

With the introduction of SHAKTI Policy in 2017, there was a paradigm shift of coal allocation mechanism from a nomination-based regime to a more transparent way of allocation of coal linkages through auction / tariff-based bidding. Now, the multiple paras of the SHAKTI Policy, for coal linkage, have been mapped to only two Windows in the Revised SHAKTI Policy, aligning with the spirit of ease of doing business, encouraging competition, efficiency, better use of capacity, seamless pit head thermal capacity addition and affordable power to the country.

The current revision of the SHAKTI policy, enriched with innovative features, is set to significantly enhance its scope and impact across the power sector. This update aims to provide greater flexibility in coal allocation, broaden the eligibility criteria to include more stakeholders, and improve overall accessibility to coal resources. Together, these changes are expected to strengthen the power sector’s operational efficiency and reliability.

The new policy will ensure coal linkage to all power producers leading to generation of more power, cheaper tariffs and an overall positive impact on the economy, thereby leading to increased employment generation potential. The reliable and affordable power supply to various sectors would catalyse economic activities and support the Atmanirbhar Bharat Initiative. The increased availability of domestic coal, in a simplified manner would also facilitate the revival of remaining stressed power assets. The linkage coal can now be used for generating power from Un-requisitioned Surplus (URS) capacity, for sale in power markets, which will not only deepen power markets by increasing availability of power in power exchanges but will also ensure optimum utilisation of generating stations.

Further, the new linkages offered to the power sector would increase the coal availability for the power sector and increase the mining activities in the coal bearing regions resulting in generation of higher revenue to the State Governments which can be utilised for development of these regions and local population in general. The policy would encourage pit head thermal capacity addition and facilitate imported coal substitution in the Imported Coal Based (ICB) plants that can secure domestic coal thereby reducing their import coal dependency. 

 The Revised SHAKTI Policy introduces two key windows for granting fresh coal linkages to Thermal Power Plants (TPPs) in the Central Sector, State Sector and Independent Power Producers (IPPs). Under Window-I, coal is allocated at the notified price. The existing mechanism for granting coal linkages to Central Sector TPPs, including Joint Ventures (JVs) and their subsidiaries, will continue. Additionally, coal linkages will be earmarked to States or to an agency authorised by a group of States based on recommendations from the Ministry of Power. These earmarked linkages can be used by State Gencos or IPPs identified through competitive bidding (TBCB) or existing IPPs with a PPA under Section 62 of the Electricity Act, 2003, including for setting up new or expansion units with PPAs under Section 62. 

Window-II allows all domestic coal-based power producers, including those using imported coal if required, to obtain coal through an auction by paying a premium over the notified price. This window supports flexibility in electricity sales and offers coal for periods ranging from up to 12 months to as long as 25 years. The revised policy aims to maximise the use of domestic coal, ensure smooth capacity addition in the thermal sector, reduce reliance on imported coal and strengthen the country’s energy independence in line with the government’s objective of ensuring Energy Security for All.