The Union Cabinet Committee, under the chairmanship of Prime Minister Narendra Modi, on Wednesday approved a revision of the Scheme for Harnessing and Allocating Koyala Transparently in India (SHAKTI) for coal allocation to the power sector.

In the revised scheme, the Cabinet Committee approved the grant of fresh coal linkages to thermal power plants (TPPs) of the central and state sectors and independent power producers (IPPs), meaning coal will be available to all entities as required.

Existing mechanisms for the grant of coal linkages to central sector TPPs, including joint ventures (JVs) and their subsidiaries, will continue.

Thermal power plants, railways, Coal India Limited (CIL), Singareni Collieries Company Limited (SCCL), end consumers, and state governments will benefit, the committee said in an official statement.

Two windows have been proposed under the revised SHAKTI policy. In the first window, the existing mechanism for coal linkage to central sector thermal power projects, including JVs and their subsidiaries, will continue. Coal linkages will be earmarked to states and to an agency authorised by a group of states as per the existing mechanism, on the recommendation of the Ministry of Power (MoP).

Additionally, coal earmarked to states can be utilised by their own Gencos, IPPs identified through tariff-based competitive bidding (TBCB), or existing IPPs having power purchase agreements (PPAs) under Section 62 of the Electricity Act, 2003, for the setting up of a new or expansion unit having a PPA under Section 62.

In the second window, any domestic coal-based power producer having a PPA or untied and imported coal-based power plants can secure coal on an auction basis for up to 25 years by paying a premium above the notified price, with the flexibility to sell electricity as per their choice.

With the revised policy, the existing eight paragraphs for coal allocation have been mapped to only two windows in the spirit of ease of doing business. It also caters to the dynamic coal requirements of the power sector and aims to promote coal import reduction or substitution, the committee said.

Apart from supporting brownfield expansion, the revised SHAKTI policy will promote the setting up of greenfield thermal power projects, primarily at pithead sites closer to coal sources.

It will also enable the sale of power generated through linkage coal in power markets. This will not only deepen power markets by increasing the availability of power in power exchanges but will also ensure optimum utilisation of generating stations, the statement added.