SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) Policy
Posted 17 Jun 2025
Updated 27 Jun 2025
3 min read
Why in the News?
The Cabinet Committee on Economic Affairs approved the Revised SHAKTI Policy for Coal Allocation to the Power Sector.
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The provisions of coal linkages of NCDP for power sector have been replaced by the Shakti Policy, 2017.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 byCentral 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)
