SHAKTI Policy

GS1 – Geography

Context:

The Cabinet Committee on Economic Affairs has given its approval to the updated SHAKTI Policy.

About SHAKTI Scheme:

Introduced by the Ministry of Coal in 2017, the SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) framework aims to allocate coal linkages in a transparent manner. It was developed to replace the earlier opaque nomination-based system with a competitive model involving auctions and tariff-based bidding. The goal is to lower coal imports and revive financially stressed thermal power units.

Major Revisions in the Policy

• Simplified Framework for Allocation:
  The number of categories has been streamlined from eight to two –
  • Window-I: Allocation on a nomination basis for government-owned power producers.
  • Window-II: Auction-based allocation open to all thermal power producers.
• Window-I Features:
  Government-owned thermal power stations, including joint ventures and subsidiaries, will continue to receive coal at fixed (notified) prices.
• Support for Private Producers:
  All thermal power plants, including those relying on domestic or imported coal, can now participate in Window-II auctions and obtain domestic coal, even if they do not have Power Purchase Agreements (PPAs). A premium over the notified price will be applicable.
• Flexible Supply Duration:
  Coal linkages can be availed for periods ranging from 12 months to 25 years, supporting both short- and long-term supply planning.
• Reducing Import Dependence:
  Plants that currently use imported coal are encouraged to switch to domestic coal sources.
• Surplus Power Market Access:
  Power that is not requisitioned by buyers can now be sold in the open market, improving efficiency in power distribution.
• Cost Optimization:
  Measures like rationalization of coal linkages and favoring pithead-based power stations (close to coal sources) are expected to reduce the cost of coal delivery and ultimately lower tariffs.
• Decentralized and Efficient Governance:
  The policy empowers a central committee and ministries with greater authority to facilitate quicker decisions and inter-agency coordination.
• Promotion of Pithead Power Plants:
  The revised policy emphasizes establishing new thermal power plants close to coal mines (pithead) to enhance fuel efficiency and logistics.

Legal and Institutional Backing for SHAKTI

• Coal Mines (Special Provisions) Act, 2015:
  Enabled transparent coal allocation through auctions and encouraged private sector involvement.
• Mines and Minerals (Development and Regulation) Amendment Act, 2021:
  Allowed the granting of combined prospecting and mining leases (PL-cum-ML), accelerating coal block development.
• Commercial Coal Mining (2020):
  Opened coal mining to private entities without any restriction on end use.
• Technological Oversight Mechanisms:
  Tools like the Coal Mines Surveillance and Management System and the Khanan Prahari App have been introduced to combat illegal coal mining activities.