SHAKTI Policy For Coal Allocation To Power Sector Revised

The Cabinet Committee on Economic Affairs chaired by the Prime Minister Narendra Modi on April 7 revised the government’s Scheme for Harnessing and Allocating Koyala Transparently in India (SHAKTI) policy. The revised SHAKTI policy seeks to approve the grant of fresh coal linkages to thermal power plants of Central and State sectors, as well as Independent Power Producers (IPPs).

The revised SHAKTI policy does not envisage any additional cost for coal companies and is expected to benefit thermal power plants, Coal India Limited, Singareni Collieries Company Limited, state government and end customers.

The revised SHAKTI policy is aimed at improving the ease of business by mapping eight paras of the existing policy, for coal allocation, to two windows. The windows proposed in the revised policy will be divided based on coal linkages to Central and state gencos. Window-I will be for gencos that buy coal at notified price, and Window-II will be for gencos that buy coal from mines at premium price.

In Window-I, the current mechanism for grant of coal linkage to Central thermal power projects (TPPs) including joint ventures and their subsidiaries will continue. Coal linkages to states or any agency appointed by a group of states will be earmarked based on recommendations by Ministry of Power as per existing mechanism. States can use the coal allotted to them in their own gencos or IPPs identified through Tariff Based Competitive Bidding (TBCB) or those having a prior Power Purchase Agreement (PPA).

In Window-II, a domestic genco operating under PPA or those using imported coal can get coal on auction basis for a period upto 12 months or for the period of more than 12 months upto 25 years by paying a premium above the notified price. The requirement for gencos to have a PPA for selling coal-based electricity has been done away with for Window-II, giving gencos flexibility to sell electricity as per their choice.

A government press release said that the revisions in SHAKTI policy will help IPPs in plan new thermal capacities, thus achieving future thermal capacity addition. It will also reduce dependence on imported coal, now that imported coal-based (ICB) power plants can purchase coal domestically, subject to the technical constraints of the ICB.

The revised policy will also promote setting up of Greenfield Thermal Power Projects nearer to the source of coal.