New Delhi: In a significant policy reform aimed at enhancing transparency, efficiency, and flexibility in coal allocation to India’s power sector, the Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, has approved the Revised SHAKTI Policy (Scheme for Harnessing and Allocating Koyala Transparently in India) . The revised framework introduces a simplified two-window system, replacing the earlier complex structure of eight separate allocation mechanisms.
This move is expected to streamline coal linkage processes, reduce power tariffs, boost domestic coal usage, attract private investment, and support India’s goal of ensuring reliable and affordable electricity.
Overview of the Revised SHAKTI Policy
The revised policy introduces two key coal allocation windows:
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Window-I: Allocation of coal at notified price to Central Government and State Government-owned thermal power producers.
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Window-II: Allocation of coal at a premium above notified price through a transparent auction mechanism to all eligible power producers, including imported coal-based (ICB) plants.
Detailed Provisions under the New Policy
Window-I: Coal at Notified Price
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Eligible Beneficiaries: Central Sector Thermal Power Projects (TPPs), including Joint Ventures (JVs) and subsidiaries, and State Government Gencos.
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Mechanism:
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Continuation of the existing nomination-based allocation on recommendations from the Ministry of Power.
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States can utilize allocated coal for their own Gencos or Independent Power Producers (IPPs) selected through Tariff-Based Competitive Bidding (TBCB).
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Existing IPPs with valid Power Purchase Agreements (PPAs) under Section 62 of the Electricity Act, 2003, can also access coal under this window for new or expansion units.
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Window-II: Coal at Premium over Notified Price
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Eligible Beneficiaries:
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All domestic coal-based power plants with or without PPAs.
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Imported coal-based power plants, depending on technical feasibility.
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Auction-Based Allocation:
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Coal can be secured for a flexible tenure ranging from 12 months to 25 years.
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Electricity generated can be sold freely in the power market without the requirement of a PPA.
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Existing Fuel Supply Agreement (FSA) holders can also participate beyond 100% of their Annual Contracted Quantity (ACQ).
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Key Impacts and Benefits
1. Simplified Policy Architecture
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Eight different coal allocation categories have now been consolidated into two core windows, aligning with the Government’s vision of ‘Ease of Doing Business’.
2. Improved Coal Availability for Dynamic Demand
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Power plants can plan long-term and short-term coal procurement based on demand scenarios, offering greater flexibility in operations.
3. Boost to Private Sector & Capacity Addition
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The new structure removes restrictions on PPA-based linkage in Window-II, enabling Independent Power Producers (IPPs) to plan for new thermal capacities even without firm long-term power off-take commitments.
4. Reduction in Coal Imports
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ICB plants can substitute imported coal with domestic supply, potentially reducing the national coal import bill. Benefits accrued will be passed on to consumers through regulatory mechanisms.
5. Encouragement to Pithead Projects
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The policy promotes the development of Greenfield TPPs at pithead locations, reducing coal transportation costs and associated environmental burden.
6. Linkage Rationalization
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Optimizing coal allocation to reduce landed cost and ease pressure on railway infrastructure, thus benefiting electricity consumers with reduced tariffs.
7. Power Market Development
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Surplus power generated using linkage coal can now be sold in open power markets. This will help deepen electricity markets and improve utilization of underused generating capacity.
Implementation Strategy
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Coal India Limited (CIL) and Singareni Collieries Company Limited (SCCL) will operationalize the policy.
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Ministries of Power and Coal will issue implementation directives and notify State authorities and Regulatory Commissions.
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An Empowered Committee, comprising the Secretaries of Power and Coal and the Chairperson of the Central Electricity Authority (CEA), will oversee operational and implementation-related issues.
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Ministries (MoP and MoC) are delegated powers to make minor policy changes as needed.
Background and Evolution of SHAKTI
The SHAKTI Policy, originally launched in 2017, marked a paradigm shift from opaque, nomination-based coal allocation to a transparent, auction-driven model. Since its inception, SHAKTI has undergone amendments in 2019 and 2023. However, the multiplicity of allocation categories caused implementation challenges. The newly approved 2025 revision aims to eliminate ambiguity, encourage competition, and improve energy affordability.
No Additional Financial Burden
The revised policy will not impose any additional expenditure on coal companies. Instead, the optimization and competitive elements are expected to improve overall coal allocation efficiency and revenue realization.
Stakeholders Benefitted
The policy is expected to benefit:
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Central and State thermal power plants
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Independent Power Producers (IPPs)
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Railways (due to optimized coal movement)
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CIL/SCCL (due to improved coal supply efficiency)
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Electricity consumers (due to potential reduction in tariffs)
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State Governments (via enhanced energy availability and reduced import costs)
Conclusion
The Revised SHAKTI Policy 2025 is a major milestone in India’s journey toward ensuring energy security, transparency in natural resource allocation, and investor confidence in the thermal power sector. By aligning coal allocation with market needs and technological flexibility, it also supports the country’s larger objectives of economic growth and sustainability.
For more details visit:
PIB Press Release – Revised SHAKTI Policy Approved
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