Revised SHAKTI Policy for Coal Linkages in 2025

The Revised SHAKTI Policy introduced in 2025 aims to streamline coal linkages for thermal power plants in India. The Cabinet Committee on Economic Affairs, led by Prime Minister Narendra Modi, approved this policy to enhance efficiency and flexibility in coal allocation. The policy introduces two distinct windows for coal linkages, promoting ease of doing business and catering to the dynamic needs of the power sector.

Revised SHAKTI Policy

The Revised SHAKTI Policy simplifies the coal linkage process. It consolidates the previous eight paras of coal allocation into two main windows. This change is designed to facilitate quicker and more transparent coal allocation to thermal power plants.

Window-I – Coal Linkage at Notified Price

Under Window-I, coal linkages will be provided to Central Sector Thermal Power Projects and State Generating Companies at a notified price. This mechanism continues the existing process and ensures that states can utilise coal linkages for their own power generation needs, including Independent Power Producers (IPPs).

Window-II – Coal Linkage at Premium Price

Window-II allows domestic coal-based power producers and imported coal-based plants to secure coal on an auction basis. This option is available for a period of up to 25 years. The flexibility in pricing enables power producers to sell electricity as they choose, enhancing market dynamics.

Implementation Strategy

The implementation of the Revised SHAKTI Policy involves Coal India Limited and Singareni Collieries Company Limited. These entities will receive directives to execute the policy. Relevant ministries and state authorities will also be informed to ensure effective dissemination.

Impact on Employment and Economy

The policy is expected to generate employment opportunities. By simplifying the coal linkage process, it encourages private investment in thermal power capacity addition. This, in turn, could stimulate local economies and create jobs.

Flexibility for Independent Power Producers

The Revised SHAKTI Policy provides flexibility for IPPs. It allows them to plan new thermal capacities without the necessity of Power Purchase Agreements (PPAs). This flexibility is crucial for accommodating future energy demands.

Promoting Domestic Coal Use

The policy aims to reduce dependency on imported coal. By allowing imported coal-based plants to access domestic coal, it promotes coal import substitution. This shift is expected to benefit consumers through reduced electricity tariffs.

Preference for Pithead Power Plants

The policy encourages the establishment of new thermal power projects near coal sources. This preference for pithead power plants reduces transportation costs and enhances the efficiency of coal utilisation.

Delegation of Powers

The Revised SHAKTI Policy includes provisions for delegating powers to concerned ministries. This delegation allows for minor policy adjustments and addresses operational issues promptly.

Benefits to Stakeholders

The primary beneficiaries of the Revised SHAKTI Policy include thermal power plants, coal companies, railways, and state governments. The policy aims to enhance the overall efficiency of the coal supply chain and improve power market dynamics.

Questions for UPSC:

1. Examine the implications of coal linkage policies on India’s energy security.
2. Discuss the role of Independent Power Producers in the context of India’s energy transition.
3. Critically discuss the impact of coal import substitution on the Indian economy.
4. With suitable examples, analyse the significance of pithead power plants in reducing energy costs.

Answer Hints:

1. Examine the implications of coal linkage policies on India’s energy security.

1. Coal linkage policies ensure a steady supply of coal to thermal power plants, enhancing energy reliability.
2. They promote domestic coal production, reducing dependency on imports and improving self-sufficiency.
3. Streamlined processes under the Revised SHAKTI Policy facilitate quicker responses to energy demands.
4. By enabling flexible pricing, these policies encourage investments in renewable energy and diversification.
5. Improved coal allocation mechanisms contribute to stability in electricity prices, essential for energy security.

2. Discuss the role of Independent Power Producers in the context of India’s energy transition.

1. IPPs contribute to increasing thermal power capacity, essential for meeting growing energy demands.
2. The Revised SHAKTI Policy allows IPPs to operate without mandatory PPAs, enhancing their operational flexibility.
3. IPPs play important role in integrating renewable energy sources into the grid, supporting energy transition goals.
4. They promote competition in the power sector, leading to improved service delivery and reduced tariffs.
5. By investing in cleaner technologies, IPPs can help reduce the carbon footprint of India’s energy sector.

3. Critically discuss the impact of coal import substitution on the Indian economy.

1. Import substitution reduces foreign exchange expenditure, positively impacting India’s trade balance.
2. It encourages domestic coal production, leading to job creation in mining and related sectors.
3. Lower dependence on imported coal stabilizes electricity prices, benefiting consumers and industries.
4. Promoting domestic coal use supports local economies and enhances energy security.
5. However, reliance on coal may hinder the transition to cleaner energy sources, posing long-term sustainability challenges.

4. With suitable examples, analyse the significance of pithead power plants in reducing energy costs.

1. Pithead power plants are located near coal mines, minimizing transportation costs and associated delays.
2. Examples include the Talcher Thermal Power Station, which benefits from proximity to coal sources, reducing operational expenses.
3. These plants enhance efficiency by lowering the ‘landed cost’ of coal, translating to cheaper electricity for consumers.
4. They support a more reliable supply chain, reducing losses associated with long-distance coal transport.
5. By promoting pithead projects, policies can stimulate regional development and energy access in remote areas.