The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister Narendra Modi, approved the revised Scheme for Harnessing and Allocating Koyala Transparently in India (SHAKTI) for allocation of coal to the power sector to help them meet long-term and short-term coal requirement.

What is SHAKTI policy?

• The government introduced the Scheme for Harnessing and Allocating Koyala (Coal) Transparently in India (SHAKTI), 2017.

• SHAKTI policy is a transparent way of allocating coal to the power sector.

• With the introduction of this policy, 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 an auction/tariff-based bidding.

• The policy was amended in 2019 and 2023.

Revised SHAKTI policy

With the introduction of Revised SHAKTI policy, two windows have been proposed.

i) Window-I: Coal linkage to central generating companies (gencos)/states at notified price.

ii) Window-II: Coal linkage to all gencos at a premium above notified price.

• Under Window-I, the existing mechanism for grant of coal linkage to central sector thermal power projects (TPPs) including joint ventures (JVs) and their subsidiary will continue.

• Moreover, coal linkage earmarked to states may be utilised by states in its own genco, Independent Power Producers (IPPs) to be identified through Tariff-Based Competitive Bidding (TBCB) or existing IPPs having Power Purchase Agreement (PPA) for setting up of a new expansion unit under ‘coal at notified price’ window.

• Under Window-II, any domestic coal-based power producer having PPA or untied and also Imported coal-based power plants (if they so require) can secure coal on auction basis for a period up to 12 months or for the period of more than 12 months up to 25 years.

Benefits of the revised policy:

• The Central Sector Thermal Power Projects (TPPs) shall continue to get coal linkage on nomination basis on the recommendation of the Ministry of Power, whereas, the linkages earmarked to the states on nomination basis on the recommendation of the Ministry of Power may be utilised by the states in the State Generating Company.

• Allowing flexible linkage for new capacity addition with or without PPA with a tenure ranging from 12 months to 25 years will encourage IPPs to plan new thermal capacities, which will help in achieving the future thermal capacity addition.

• The revised policy, besides supporting brownfield expansion, will promote setting up of new thermal power projects primarily at pithead sites — nearer to the coal source.

• The imported coal-based plants can secure domestic coal under ‘premium over notified price’ segment, subject to the technical constraints of ICB (imported coal based) plants, thereby reducing their import coal dependency.

• The flexibility offered to imported coal-based plants to switch to domestic coal sources should help reduce India’s coal import dependence. 

• Furthermore, the policy’s provisions for selling surplus power in electricity markets will enhance liquidity in power exchanges while ensuring better utilisation of generation capacity.

(The author is a trainer for Civil Services aspirants.)