The Indian government has approved a revised version of the SHAKTI scheme, which is aimed at improving the allocation of coal to power plants. This move is expected to meet the long-term and short-term coal needs of the power sector. The decision, made by the Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi, aims to simplify the coal linkage process for power plants, making it more transparent and efficient. The revision of the SHAKTI scheme is designed to benefit thermal power plants in the central and state sectors, as well as Independent Power Producers (IPPs), ensuring they have the necessary coal supply for uninterrupted electricity generation.
Key Changes in Coal Linkage Mechanism
The revised SHAKTI scheme introduces two new windows for coal linkage allocation. The first window allows coal to be allocated to central and state-owned power plants at a notified price, while the second provides coal to all power plants at a premium above the notified price. The existing mechanism for granting coal linkages to central sector thermal power plants, including joint ventures and subsidiaries, will continue under the ‘coal at notified price’ segment.
Additionally, the revised policy introduces more flexibility for coal allocation. Under the ‘premium over notified price’ segment, domestic coal-based power producers can secure coal through auctions, either for a period of up to 12 months or for a longer tenure of up to 25 years. This flexibility is expected to encourage IPPs to plan and set up new thermal power plants, which will help meet future electricity demands.
Focus on New Capacity Addition and Sustainability
The revised SHAKTI policy also focuses on promoting the expansion of existing power plants (brownfield projects) as well as the establishment of new thermal power plants at pithead locations, which are closer to coal sources. This strategy aims to reduce transportation costs and improve the efficiency of coal usage. The policy also encourages the reduction of dependency on imported coal, particularly by allowing imported coal-based plants to use domestic coal under the ‘premium over notified price’ category.
With the aim of further reducing dependency on imported coal, the policy provides the flexibility for plants to sell electricity generated from coal secured under the premium segment without the need for a power purchase agreement (PPA). This change allows power plants to have more control over the sale of their electricity, thus promoting greater market flexibility.
The government has stated that the benefits from reduced imported coal usage will be passed on to electricity consumers, helping to lower overall energy costs for end-users.
