The Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi has approved the Revised SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) Policy. The updated framework aims to simplify the coal linkage mechanism and better align it with the evolving requirements of the thermal power sector in India.
Under the revised policy, coal linkages will be granted to Thermal Power Plants (TPPs) across Central Sector, State Sector, and Independent Power Producers (IPPs) through two distinct windows. The first window allows coal allocation to central and state generating companies at notified prices, continuing the existing nomination-based mechanism. This also includes linkages for joint ventures and their subsidiaries, and allows states to utilise their earmarked coal linkages for their own generating companies or IPPs selected through tariff-based competitive bidding.
The second window introduces coal allocation to all domestic coal-based power producers and imported coal-based plants on an auction basis, where coal is offered at a premium above the notified price. This provision is notably more flexible, allowing power producers to secure coal either for short-term periods up to 12 months or for long-term durations extending to 25 years. Importantly, the requirement for Power Purchase Agreements (PPAs) under this window has been eliminated, enabling plants to sell electricity at their discretion.
The implementation of this policy will be overseen by Coal India Limited (CIL) and Singareni Collieries Company Limited (SCCL), with relevant directions to be issued for the effective rollout. The Ministries concerned, along with state governments and regulatory commissions, will also be informed for seamless coordination.
The Revised SHAKTI Policy is expected to have a wide-reaching impact. It streamlines eight existing coal allocation provisions into just two clear categories, enhancing ease of doing business. The policy allows power plants to plan their coal procurement more effectively, based on their anticipated demand and operational needs.
By removing the PPA requirement under Window-II, the policy empowers power producers to explore market-based sales of electricity, thereby fostering greater flexibility and utilisation of generating assets. It also encourages thermal capacity additions by private developers and IPPs, with coal linkages available for both existing and new units.
Additionally, the revised policy facilitates domestic coal allocation to imported coal-based plants, which can help reduce India’s dependency on coal imports. Regulatory commissions will assess and ensure that the cost savings from this substitution benefit end consumers.
The policy also prioritises the development of pithead power plants located near coal sources and supports both brownfield expansions and greenfield projects. In a bid to reduce coal transportation costs, it includes a rationalisation mechanism to minimise the landed cost of coal, thereby potentially lowering electricity tariffs for consumers.
To further improve administrative efficiency, the policy delegates authority to the Ministries of Coal and Power to make minor modifications. An Empowered Committee, consisting of the Secretaries of Power and Coal and the Chairperson of the Central Electricity Authority (CEA), will be set up to address operational and implementation challenges.
Existing Fuel Supply Agreement (FSA) holders will also benefit, as they will be permitted to participate under Window-II even beyond their annual contracted quantities. Moreover, the policy allows for un-requisitioned surplus power generated through linkage coal to be sold in power markets, enhancing availability on power exchanges and optimising power generation assets.
Notably, the revised policy entails no additional expenditure for coal companies. It is expected to benefit a wide spectrum of stakeholders including thermal power plants, Indian Railways, CIL, SCCL, state governments, and electricity consumers, marking a decisive step towards strengthening India’s energy security and coal supply mechanisms.
