About History of Indian Coal Industry

The Government introduced Scheme for Harnessing and Allocating Koyala (Coal) Transparently in India (SHAKTI), 2017, which was issued by the Ministry of Coal on 22.05.2017, followed by amendments in this Policy issued by the Ministry of Coal on 25.03.2019 and 08.11.2023. SHAKTI Policy is a transparent way of allocating coal to Power Sector. The main features of the SHAKTI Policy (as detailed under its various Paras) are as under:

• Para A of the SHAKTI Policy dealt specifically about the coal linkages granted under the Pre-SHAKTI era. Para A (i) of the SHAKTI Policy allowed FSA to be signed with the aforementioned balance 30,000 MW capacity [LoA holders] provided that the plants are commissioned, respective milestones met, all specified conditions of the LoA fulfilled within specified timeframe and where nothing adverse is detected against the LoA holders. However, the outer time limit within which the power plant of the LoA holders must be commissioned for consideration of FSA was 31.03.2022, failing which LoA would stand cancelled
• Para A (iii) & A (iv) covered the capacities against which FSAs were executed under the Presidential Directive of 2013. Para A (iii) allowed continuation of coal supply at the rate of 75% of Annual Contracted Quantity (ACQ) to the capacities of about 68,000 MW (revised capacity) as per the decision of the CCEA dated 21.06.2013. About 19,000 MW capacities out of the 68,000 MW could not be commissioned by 31.03.2015. Para A (iv) of the SHAKTI Policy allowed coal supplies to these capacities at 75 % of the ACQ against the FSA provided these plants are commissioned within 31.03.2022. The medium term Power Purchase Agreements (PPAs) to be concluded in future against bids invited by DISCOMS have also been made eligible for linkage coal supply.
• Para B (i):The Coal India Limited (CIL)/ the Singareni Collieries Company Limited (SCCL) may grant coal linkages to State / Central Gencos / Joint Ventures at notified price on the recommendations of the Ministry of Power.
• Para B (ii):Linkages to Independent Power Producers (IPPs), having Long Term PPAs based on domestic coal, where IPPs, participating in auction, will bid for discount on the tariff (in paise/unit). The bidders, who could not participate in the linkage auction under B (ii) due to any reason, may be allowed to participate in the B (ii) auctions of this policy. Further, the bidders, who could not secure linkage for full ACQ, may obtain linkage for the balance quantity by participating in future auctions at a later stage under B (ii) after benchmarking discount. 
• Para B (iii):  Linkages to IPPs/ Power Producers without PPAs shall be on auction basis. 
• Para B (iv):Coal linkages may also be earmarked for fresh PPAs, by pre-declaring the availability of coal linkage with description, to the States. The States may indicate these linkages to DISCOMS/State Designated Agencies (SDAs).
• Para B (v):Power requirement of group of States can also be aggregated and procurement of such aggregated power can be made by an agency, designated by the Ministry of Power or authorized by such States on the basis of tariff based bidding. 
• Para B (vi):Linkages shall be granted for full normative quantity to Special Purpose Vehicle (SPV) incorporated by nominated agency for setting up Ultra Mega Power Projects (UMPPs) under Central Government initiative through tariff based competitive bidding under the guidelines for determination of tariff, on the recommendation of the Ministry of Power.
• Para B (vii):The Ministry of Coal, in consultation with the Ministry of Power, may formulate a detailed methodology of a transparent bidding process for allocating coal linkages to IPPs, having PPAs, based on imported coal with full pass through of cost savings to the consumers.
• Para B (viii):
  • (a) All such Power plants including private generators which do not have PPAs, shall be allowed coal linkage under SHAKTI Policy for a period of minimum 3 months and upto a maximum of 1 year, provided further that the power generated through that linkage is sold through any product in power exchanges or in short term through a transparent bidding process through Discovery of Efficient Energy Price (DEEP) portal.
  • (b) Use of the existing coal linkage for sale of power through short term PPAs using DEEP portal or power exchange by the generator, which terminates PPA in case of default in payment by the DISCOM, for a maximum period of 2 years or until they find another buyer of power under long /medium term PPA, whichever is earlier.
  • (c) Coal linkage under B (v) is also applicable in cases, where the nodal agency designated by the Ministry of Power aggregates/procures the power requirement for a group of States even without requisition from such States.
  • (d) Central and State generating companies can act as an aggregator of power of stressed power assets.
  • (e) Mechanism to ensure servicing of debt.

The beneficiaries of the coal allocation under the SHAKTI Policy are the coal-based Power Generating Companies in the country. The coal linkages to the following capacities have been granted under various Paras of the policy: 

1. Clearance has been given for signing of Fuel Supply Agreement (FSA) to Letter of Assurance (LoA) holders with a total capacity of 8,780 MW under the provisions of Para A(i) of SHAKTI Policy.
2. 58 Thermal Power Plants (TPPs) have been granted linkage for a total capacity of 63,810 MW under the provisions of Para B (i) of SHAKTI policy.
3. Under SHAKTI B (ii), total six rounds of auction have been held in which total booked quantity of coal linkage is 38.90 MillionTonne Per Annum (MTPA).
4. Under SHAKTI Para B (iii), eight rounds of auction have been held and about 60.84 MTPA of coal linkage has been booked.
5. Under SHAKTI Para B (iv), the coal linkages have been earmarked to the States of Gujarat, Uttar Pradesh, Madhya Pradesh, Rajasthan, Maharashtra, Karnataka, West Bengal, Assam, Kerala, Bihar, Uttarakhand and Maharashtra for a capacity of 4000 MW, 5600 MW, 6740 MW, 3299 MW, 1600 MW, 2000 MW, 4100 MW, 500 MW, 500 MW, 2400 MW, 1320 MW and 1600 MW respectively. 
6. Moreover, Para B (v) of SHAKTI Policy, coal linkage has been earmarked for a capacity of 4500 MW.
7. 23 tranches of linkage auction have been conducted by Coal India Limited under Para B (viii) (a) of SHAKTI Policy and about 105.43 MT of coal has been booked by the successful bidders.

The Cabinet Committee on Economic Affairs (CCEA) in the meeting held on 07.05.2025, has accorded its approval for the Revised SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) Policy for Coal Allocation to Power Sector. The Revised SHAKTI Policy adds to the series of coal sector reforms being undertaken by the Government.

With the introduction of SHAKTI Policy in 2017, there was a paradigm shift of coal allocation mechanism from a nomination-based regime to a more transparent way of allocation of coal linkages through auction / tariff-based bidding. Now, the multiple paras of the SHAKTI Policy, for coal linkage, have been mapped to only two Windows in the Revised SHAKTI Policy, aligning with the spirit of ease of doing business, encouraging competition, efficiency, better use of capacity, seamless pit head thermal capacity addition and affordable power to the country.
 

The current revision with innovative features will further enhance the scope and impact of the SHAKTI policy and support the power sector through

• Greater flexibility
• Wider eligibility and
• Better accessibility to coal

The new policy will ensure coal linkage to all power producers leading to generation of more power, cheaper tariffs and an overall positive impact on the economy, thereby leading to increased employment generation potential. The reliable and affordable power supply to various sectors would catalyze economic activities and support the Atmanirbhar Bharat Initiative. The increased availability of domestic coal, in a simplified manner would also facilitate the revival of remaining stressed power assets. The linkage coal can now be used for generating power from Un-requisitioned Surplus (URS) capacity, for sale in power markets, which will not only deepen power markets by increasing availability of power in power exchanges but will also ensure optimum utilization of generating stations.

Further, the new linkages offered to the power sector would increase the coal availability for the power sector and increase the mining activities in the coal bearing regions resulting in generation of higher revenue to the State Governments which can be utilized for development of these regions and local population in general. The policy would encourage pit head thermal capacity addition and facilitate imported coal substitution in the Imported Coal Based (ICB) plants that can secure domestic coal thereby reducing their import coal dependency. 

Following are the provisions of the Revised SHAKTI Policy

For grant of fresh coal linkages to Thermal Power Plants of Central Sector/State Sector/ Independent Power Producers (IPPs), following two windows have been approved under the Revised SHAKTI policy:

A. Coal Linkage to Central Gencos/States at Notified price: Window–I

B. Coal Linkage to all Gencos at a Premium above Notified price: Window–II

Window-I (coal at notified price)

i. Existing mechanism for grant of coal linkage to Central Sector Thermal Power Projects (TPPs) including Joint Ventures (JVs) & their subsidiaries would  continue.

ii. Coal linkages to be earmarked to States and to an agency authorized by group of States as per existing mechanism, on the recommendation of Ministry of Power. Coal linkage earmarked to States may be utilized by States in its own Genco, IPPs to be identified through TBCB or existing IPPs having PPA under Section 62 of the Electricity Act, 2003 for setting up of a new expansion unit having PPA under Section 62.

Window-II (premium over notified price)

Any domestic coal-based power producer having PPA or untied and also Imported coal-based power plants (if they so require) can secure coal on auction basis for a period upto 12 months or for the period of more than 12 months upto 25 years by paying premium above the notified price and providing the power plants the flexibility to sell the electricity as per their choice.

This Revised SHAKTI Policy would maximize domestic coal utilization, ensure seamless thermal capacity addition, reduce dependence for coal on global markets, reinforce nation’s energy independence aligning with Government’s push for Energy Security for All.

The details of the Revised Shakti Policy, 2025 are available at the website of the Ministry of Coal (https://www.coal.nic.in/sites/default/files/2025-05/20-05-20220a-wn.pdf).

As of now, coal linkages to the following capacities have been granted under window-I of the policy:

Under Para 2 (II)(A)(ii) of the Revised SHAKTI Policy, 2025, the coal linkages have been earmarked to the States of Tamil Nadu, Assam, Gujarat and Madhya Pradesh for a capacity of 660 MW, 3200 MW, 4000 MW and 1000 MW respectively. The earmarked coal linkage to the States of Assam, Gujarat and Madhya Pradesh would operate only after the exemption is granted by the Empowered Committee. Empowered Committee in its meeting held on 04.08.2025 had granted exemption to the State of Assam and Gujarat as per Para 2(I)(vii) of the Revised SHAKTI Policy, 2025. Empowered Committee considered the request of the State of Madhya Pradesh and opined that since the location of the identified plants is within a radial distance of 300 km from the allocated coal source, there is no requirement of exemption.