- Revised policy introduces 2 main allocation windows
- Changes expected to reduce power generation costs
In a landmark decision aimed at reforming coal allocation and strengthening the power sector, on 8 May 2025, the Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, approved the revised SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) Policy.
The revised policy seeks to ensure more efficient, transparent, and flexible coal distribution to power producers across India.
Background
The original SHAKTI Policy, launched in 2017, replaced the nomination-based coal allocation system with a more transparent, competitive framework using auctions and tariff-based bidding.
The Revised SHAKTI Policy 2025 builds upon this by simplifying and consolidating the policy structure. Multiple earlier provisions have now been streamlined into two main allocation windows, enhancing the ease of doing business, fostering competition, and enabling faster thermal capacity expansion.
Key objectives of revised policy
- Maximise utilisation of domestic coal
- Reduce dependence on coal imports
- Facilitate thermal capacity additions at pithead locations
- Improve coal accessibility and flexibility for all power producers
- Revive stressed power assets
- Enhance economic activity and employment generation
Major policy features
To facilitate fresh coal linkages for thermal power plants across the central and state sectors and independent power producers (IPPs), the revised SHAKTI Policy has introduced two designated allocation windows:
- Window I: Notified price allocation: The existing mechanism for coal linkages at notified prices to central and state government power utilities (Gencos), their joint ventures, and subsidiaries will continue. States may allocate linkages to their own Gencos or IPPs selected through tariff-based competitive bidding (TBCB) or with existing power purchase agreements (PPAs) under Section 62 of the Electricity Act, 2003.
- Window II: Premium over notified prices (auction-based): Open to all domestic coal-based and imported coal-based power producers, with or without PPAs. Coal can be secured through auctions, either short-term (up to 12 months) or long-term (up to 25 years) by paying a premium above the notified prices. Producers have complete flexibility to sell generated power in the open market, boosting competition and enhancing the power exchanges.
Expected impact
- Wider access to coal: By broadening eligibility and offering flexible linkage durations, the policy ensures all types of power producers have a fair opportunity to access domestic coal.
- Cheaper, more reliable power: Greater access to coal is expected to reduce generation costs, translating into more affordable electricity for consumers.
- Economic stimulus: Enhanced power availability will support industrial growth and local development, particularly in coal-rich regions.
- Employment generation: Increased mining activity and the revival of stalled power projects will create direct and indirect employment opportunities.
- Support for Atmanirbhar Bharat: Reduced import dependence and increased coal production at home align with the government’s self-reliance mission.
- Revival of stressed assets: The revised policy enables usage of coal for generation from Un-requisitioned Surplus (URS) capacity, improving utilisation and enabling recovery of underperforming assets.
Strategic alignment
The revised SHAKTI Policy is aligned with India’s broader energy goals – ensuring energy security, supporting clean energy integration, and fostering long-term sustainability in the power sector.
The structured yet flexible allocation of coal under this framework ensures the optimal use of resources, minimises risks from global coal markets, and reinforces India’s march towards energy independence.
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