Objectives

Features

• To ensure the availability of coal to all the thermal power plants via fair and transparent coal allocation mechanism.
• Help the generators to get cheaper coal and thereby reduction in cost of generation. 
• Transfer the benefits of linkage coal to the end consumers. 
• To reduce dependency on imported coal and boost domestic coal industry.

About Shakti Policy:

• Introduced in: 2017 
• Ministry Involved: Ministry of Coal
• Implemented by: Coal India Limited (CIL) and Singareni Collieries Company Limited (SCCL)
• Supply of coal to thermal power plants was earlier governed by New Coal Distribution Policy, 2007 (NCDP). 
  • Coal under these policies is supplied as per the commercial terms and conditions of the Fuel Supply Agreement (FSA) executed between the coal companies and the power plants
• The provisions of coal linkages of NCDP for power sector have been replaced by the Shakti Policy, 2017.
  • It aims to phase out erstwhile Letter of Assurance (LoA) - FSA regime. 
  • Under SHAKTI, coal allocation mechanism shifted from a nomination-based regime to a more transparent way of allocation of coal linkages through an auction / tariff-based bidding.

Key Highlights of the Revised SHAKTI Policy

• Simplified Allocation Framework: It streamlines coal allocation by consolidating the earlier 8 categories into 2 simplified mechanisms to enhance ease of doing business in the power sector.
  • Window-I: Coal linkages at notified prices will continue to be provided to thermal power plants owned by Central and State Governments, including their joint ventures & subsidiaries.
  • Window-II: All thermal power producers, including those using domestic or imported coal, can now procure coal through an auction process, paying a premium over the notified price.
• Removal of Mandatory PPAs (Power Purchase Agreements): For Window-II, the PPA requirement has been scrapped, thereby providing the power plants the flexibility to sell the electricity as per their choice.
• Caters to Sector's Dynamic Coal Demands: Auctions will allow procurement for periods ranging from up to 12 months to as long as 25 years, based on short/ long term demands.
• Preference to 'Pithead' Power Plants: Promote setting up of Greenfield Thermal Power Projects primarily at pithead sites, i.e., nearer to the coal source.
• Power Aggregation for States: Group of States can collectively procure power through designated agencies via tariff-based bidding.
• Import Substitution: Imported Coal-Based plants allowed using domestic coal under Window-II, reducing import dependence.
• Linkage Rationalization: Aims to cut coal delivery costs and ease railway load, resulting in lower tariffs for consumers.
• Delegation of power:
  • Minor policy changes delegated to Ministry of Coal and Ministry of Power.
  • Empowered Committee to resolve operational issues.
• Flexibility to Existing Fuel Supply Agreement (FSA) Holders: Existing FSA holders can procure beyond 100% ACQ under Window-II. Fresh applications allowed under revised policy post expiry of old linkages.
• Sale of Un-requisitioned Surplus: Allows sale of surplus power in power markets, increasing efficiency and market depth.
• Key beneficiaries: 
  • Power companies (assured coal supply) 
  • Consumers (reduced cost of power) 
  • Indigenous Coal Sector (reduction in Imported coal) 
  • Banking Sector (reduced NPAs)   
  • State Government
  • Railways