New SHAKTI Policy Offers Thermal Plants Greater Autonomy and Coal Linkage Options

In a significant policy reform aimed at energizing India’s power sector, the Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, approved the Revised SHAKTI Policy (Scheme for Harnessing and Allocating Koyala Transparently in India) on May 7, 2025. The revised framework simplifies the coal linkage process for thermal power producers, introduces flexibility in supply mechanisms, and aims to enhance the ease of doing business in the sector.

Why in News?

The Government of India approved the Revised SHAKTI Policy to streamline coal allocation, enhance energy security, and boost private sector participation. With a simplified two-window system replacing the earlier eight-paragraph format, the move marks a paradigm shift towards transparency, efficiency, and greater autonomy in the coal supply chain.

Key Features of the Revised SHAKTI Policy (2025)

Window-I: Coal Linkage at Notified Price

• Applicable to Central Sector TPPs (Thermal Power Projects) including Joint Ventures and subsidiaries.
• Coal linkage to be earmarked to State Governments or authorized agencies based on recommendations by the Ministry of Power.

Utilization allowed in,

• State Gencos.
• IPPs selected via Tariff-Based Competitive Bidding (TBCB).
• Existing IPPs with PPA under Section 62 of the Electricity Act, 2003.

Window-II: Coal Linkage at Premium Price

• Open to all domestic coal-based and imported coal-based power plants.
• Coal can be secured via auction for,
• Short-term (up to 12 months).
• Long-term (up to 25 years).
• No Power Purchase Agreement (PPA) required.
• Freedom to sell electricity in power markets.

Implementation Strategy

• Coal India Ltd (CIL) and Singareni Collieries Company Ltd (SCCL) will implement the policy.
• An Empowered Committee comprising Secretary (Power), Secretary (Coal), and Chairperson, Central Electricity Authority (CEA) will handle operational matters.
• Powers delegated to Ministries (MoC, MoP) for minor changes.

Major Benefits and Impact

• Simplifies policy from 8 complex clauses to just 2 windows.
• Facilitates coal demand management for both long- and short-term needs.
• Enables new capacity addition by Independent Power Producers (IPPs) with or without PPA.
• Encourages coal import substitution, particularly for Imported Coal-Based (ICB) plants.
• Promotes Pithead power plants to minimize logistics cost and carbon footprint.
• Enhances linkage rationalization to reduce landed cost of coal.
• Allows sale of surplus power in exchanges, deepening market participation.

No Additional Expenditure

• Policy revision does not impose any extra financial burden on coal companies.

Background

• SHAKTI Policy was launched in 2017 to introduce transparency in coal allocation.
• Originally, only Central/State sector plants were allocated coal through nomination.
• Amendments were made in 2019 and 2023, culminating in this latest 2025 revision.