SHAKTI – Scheme for Harnessing and Allocating Koyala Transparently in India

SHAKTI - Scheme for Harnessing and Allocating Koyala Transparently in India

To make coal available to all the Thermal Power Plants of the country

SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) is a policy designated by the Union Government for the allocation of coal among thermal power plants in a transparent and objective manner.

SHAKTI – Scheme for Harnessing and Allocating Koyala Transparently in India – Objectives

To make coal available to all the Thermal Power Plants of the country in a transparent and objective manner and at the same time ensure that the benefits of linkage coal are transferred to the end consumers.

Allocation of linkages (buying coal from a mine closer to the power plant) for power sector shall be based on auction of linkages or through Power Purchase Agreement (PPA) based on competitive bidding of tariffs except for the State and the Central Power Generating companies.

The Companies which do not have coal linkages at present, would benefit immensely from the new policy as they would get domestic fuel supplies at competitive rates through auction. With this policy, the Government also aims to reduce dependence on imported coal.

As regards the initiatives for rationalization of coal linkages, it is estimated that during 2014-15 to 2016-17, the source rationalisation of coal linkages has resulted in estimated saving of Rs. 3000 crore per annum on transportation cost to the power utilities.

SHAKTI – Scheme for Harnessing and Allocating Koyala Transparently in India – Background:

Coal linkage to the power sector is governed by provisions of the New Coal Distribution Policy (NCDP), 2007.

Under the NCDP, a system of issuance of Letter of Assurance (LoA) was introduced wherein requests for Linkage/LoA are forwarded to Ministry of Power for its recommendations.

These recommendations are placed before the Standing Linkage Committee (SLC) (Long Term) which authorizes issue of LoAs.

Till 2010, Coal India Limited (CIL) had issued LoAs for approximately 1,08,000 MW capacity and no new LoAs were issued thereafter due to the prevailing scarcity scenario.

In a decision taken on 21 June 2013, the Cabinet Committee on Economic Affairs directed CIL to sign Fuel Supply Agreements (FSAs) with Thermal Power Projects of about 78,000 MW capacity. The coal availability scenario has, now, emerged from scarcity to adequacy.

In this adequate coal availability scenario, the present policy proposes a new linkage allocation policy based on transparent and objective criteria for the optimal utilization of the natural resources.

Salient Features of SHAKTI:

1) New and more transparent auction-based coal linkage policy.

2) Thermal Power Plants (TPP) having Letter of Assurances shall be eligible to sign Fuel Supply Agreement after ensuring that the plants are commissioned, respective milestones (like achieving financial closure, obtaining clearances etc.) met, all specified conditions of the Letter of Assurances fulfilled within specified time frame and where nothing adverse is detected against the Letter of Assurances holders. 

3) Thermal Power Plants (part of 78000 MW) that could not be commissioned by Financial Year 2015 shall now be eligible for coal drawl if the plants are commissioned before Financial Year 2022.

4) The allocation of linkages for power sector shall be based on auction of linkages or through Power Purchase Agreement (PPA) based on competitive bidding of tariffs. Exception :

(i) State and the Central Power Generating companies – done by Ministry of Power and

(ii) Exceptions provided in Tariff Policy, 2016

5) Coal drawl will be permitted against valid Long Term Power Purchase Agreements and to be concluded Medium Term Power Purchase Agreements.

6) The approved framework ensures that all projects with linkages are supplied coal as per their entitlement. This will ensure the rights of coal supplies for Fuel Supply Agreement holders and signing of Fuel Supply Agreement with Letter of Assurance holders.

7) SHAKTI has been envisaged to make optimal allocation of the natural resource across power units.

8) Future coal linkage will be granted as per the following:

  • The Independent Power Producers (IPPs) with Power Purchase Agreements (PPAs) (based on domestic coal) participating in the auction will bid for discounts on the existing tariff and this would be adjusted from the gross amount at the time of billing;
  • The Independent Power Producers (IPPs) with Power Purchase Agreements (PPAs) (based on imported coal) shall be made available through a transparent bidding process; The Independent Power Producers (IPPs) without Power Purchase Agreements shall be on the basis of auction where bidding for linkage shall be done over the notified price of the coal company;
  • Linkages will be earmarked to States where any linkage quantity unutilized for two years lapses. State may indicate the earmarked linkages to the power distribution companies; 
  • Linkages, for full normative quantity, will be granted for setting up Ultra Mega Power Plants.

9) The new policy prescribes direct linkage allocation to public-sector plants and reverse auction for supply of coal linkages to private players; it also integrates fuel linkage to the tariff-based competitive bidding for long term power purchase by distribution companies with a view to ensuring that firms with fuel supplies are not deprived of Power Purchase Agreements and vice versa.

10) Policy directions will be issued by the Ministry of Coal and Ministry of Power and will be implemented by Coal India Limited/Singareni Collieries Company Limited and different power entities of the State and Central Government.

 

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Raja Raja Cholan
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