The Cabinet Committee on Economic Affairs (CCEA), led by Prime Minister Narendra Modi, has approved a revised SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) policy aimed at streamlining the allocation of coal to power plants. This decision, announced on Wednesday, is expected to help power plants meet both their long-term and short-term coal requirements while simplifying the linkage process.

The revised SHAKTI policy introduces two distinct windows for coal allocation. Window-I focuses on providing coal linkages to central and state power generating companies (Gencos) at notified prices. This window continues the existing mechanism for granting coal linkages to Central Sector Thermal Power Projects (TPPs), including Joint Ventures (JVs) and their subsidiaries. Additionally, coal linkages earmarked to states can be utilized by the States' own Gencos or Independent Power Producers (IPPs) selected through Tariff Based Competitive Bidding (TBCB) or existing IPPs with Power Purchase Agreements (PPA). This applies to setting up new expansion units with PPAs.

Window-II offers coal linkages to all Gencos at a premium above the notified price. This allows any domestic coal-based power producer with or without a PPA, as well as imported coal-based power plants (if they require), to secure coal through auctions. The coal can be secured for a period of up to 12 months, or for a longer term of up to 25 years, providing power plants the flexibility to sell electricity as per their choice. This eliminates the PPA requirement for Window-II, promoting greater market dynamism.

The new policy aims to cater to the dynamic coal requirements of the power sector, enabling power plants to plan for meeting their coal needs based on their long-term or short-term demand. Central Sector Thermal Power Projects (TPPs) will continue to receive coal linkage on a nomination basis, based on the recommendation of the Ministry of Power. Similarly, linkages earmarked to the States will be nominated based on the Ministry of Power's recommendation and utilized by the State Generating Company.

Industry experts have welcomed the revised SHAKTI policy, particularly the elimination of the PPA requirement for Window-II, as it is expected to ensure greater market dynamism. With this flexibility, power plants can sell electricity freely, which can boost efficiency and help in meeting fluctuating demand more effectively.

Furthermore, the revised policy is expected to reduce coal imports by allowing imported coal-based power plants to use domestic coal, thus strengthening India's energy independence. The emphasis on pithead power plants, located near coal sources, will also help optimize transportation costs and potentially reduce electricity tariffs for consumers. Additional measures, such as linkage rationalization, will streamline coal transportation, ease railway congestion and further cut costs for power producers.

An empowered committee, comprising officials from key ministries, will oversee the implementation of the revised SHAKTI policy and make necessary policy adjustments as needed. The implementation of the decisions will be carried out through directions issued to Coal India Limited (CIL) and Singareni Collieries Company Limited (SCCL).

In conclusion, the revised SHAKTI policy represents a significant step towards enhancing coal availability, ensuring fair pricing, and promoting long-term sustainability in India's power sector. Stakeholders anticipate reduced operational costs, improved energy accessibility, and strengthened infrastructure for power generation as the nation moves forward with this revised coal allocation strategy.