SHAKTI Coal Linkage Policy

The SHAKTI policy is the Government of India's framework for allocating domestic coal linkages to the power sector. Introduced in 2017, its core objective is to make coal available to eligible thermal power producers through a transparent and objective process, while passing the benefits of competitive allocation to electricity consumers.

Meaning of coal linkage

A coal linkage is a long-term arrangement under which a power producer receives coal from a designated supplier, generally through a Fuel Supply Agreement subject to prescribed conditions. It improves fuel-supply certainty but does not amount to free coal or unconditional supply.

Core allocation approach

SHAKTI stands for the Scheme for Harnessing and Allocating Koyala Transparently in India. It replaced much of the earlier discretionary allocation through Letters of Assurance with rule-based routes suited to different categories of power producers.

• Coal linkages for eligible private generators are generally connected with competitive bidding, including bids offering tariff discounts or power supply at competitively discovered tariffs.
• Specified central and state generating companies may receive linkages through an administrative route at the notified price, subject to policy conditions.
• The framework links coal allocation more closely with actual power procurement and electricity-generation requirements.

Economic significance

The policy seeks to improve the efficient use of domestic coal, reduce uncertainty for thermal generators and promote competition in power procurement. By using transparent allocation and tariff-based bidding, it aims to lower fuel-related costs and help deliver affordable electricity to consumers.