New Delhi: On Wednesday, the Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, approved the revised Scheme for Harnessing and Allocating Koyala Transparently in India (SHAKTI) to simplify the allocation of coal to the power sector. This decision is aimed at addressing both long-term and short-term coal requirements for thermal power plants across India.
The revised SHAKTI scheme introduces two key windows for coal allocation:
- Coal Linkage to Central/State Sector Thermal Power Plants at Notified Price
- Coal Linkage to All Power Generating Companies at a Premium Above Notified Price
Under the new framework, the existing coal linkage mechanism will continue for central sector thermal power projects, including joint ventures (JVs) and their subsidiaries. Additionally, coal earmarked for states may now be used by state-owned generating companies (gencos) or Independent Power Producers (IPPs) identified through Tariff-Based Competitive Bidding (TBCB) for the development of new or expanded units under the ‘coal at notified price’ category.
For the ‘premium over notified price’ segment, both domestic coal-based power producers with Power Purchase Agreements (PPAs) and those without PPAs, as well as imported coal-based plants, will be able to secure coal through auctions. These auctions will allow for flexible coal allocations for periods of up to 12 months or longer, extending up to 25 years. This flexibility is designed to support the growth of new thermal power capacities and ensure a steady supply of coal for power generation.
The revised policy will further promote the establishment of new thermal power projects, particularly at pithead locations closer to coal sources, helping reduce logistical challenges and supporting brownfield expansion.
The SHAKTI Policy, first introduced in 2017, shifted the coal allocation system from a nomination-based approach to a more transparent auction and tariff-based bidding system. While the nomination-based allocation continues for central and state sector power plants, the revised policy includes several enhancements to provide greater flexibility in coal distribution, especially for private power producers.
Importantly, the updated policy eliminates the requirement for a Power Purchase Agreement (PPA) for electricity generated using coal secured under the ‘premium over notified price’ segment. This change offers power plants the flexibility to sell electricity as per their market choices. Additionally, imported coal-based plants can now secure domestic coal under the ‘premium over notified price’ segment, which is expected to reduce their dependency on imported coal and lower energy costs for consumers.
“The benefits accrued from substituting imported coal with domestic supplies will be determined by the Appropriate Regulatory Commission and passed on to electricity consumers and beneficiaries,” stated the Ministry of Coal in a press release.
The revised SHAKTI scheme marks a significant step towards a more efficient and transparent coal allocation system, which is expected to boost the country’s power generation capacity and reduce coal import dependency in the long term.
