Union Cabinet approves revamped coal allocation policy as India plans to expand its thermal power capacity

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The Cabinet Committee on Economic Affairs (CCEA) on May 7 has approved the revised Scheme for Harnessing and Allocating Koyala Transparently in India (SHAKTI) for better allocation of coal to the power sector, which is expected to grow at a CAGR of 6 percent until 2030.

The updated policy will now have two categories: 'Window-I', which is meant for coal linkage to central and state generating companies (gencos) at the notified price, and Window-II, which is for coal linkage to all gencos at a premium above the notified price.

The approval was given by the Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, in a move aimed at simplification of the linkage process.

An important decision under the revised policy is the doing away with the need for a genco to have a power purchase agreement (PPA) in place to lift coal. Under 'window-II', the requirement of PPA has been entirely done away with. This will ensure quicker coal linkage for new thermal power plants and will push more private players to set up thermal power plants as they will be able to sell the electricity as per their choice in the absence of PPAs. To be sure, the Centre is promoting pithead power plants to avoid coal logistics issues.

The revised policy will offer an opportunity to a number of private companies that have won commercial and captive coal mines in the government's auctions to set up thermal power plants in the future.

Although India aims to build a renewable energy capacity of at least 500 gigawatts (GW) by 2030, the country intends to continue the expansion of coal-fired power plants with an additional capacity of about 95 GW by 2030. This is to ensure the affordability of electricity in India and also the stability of the national grid, as renewable power is intermittent.

The Coal Ministry, in a statement, said under the 'coal at notified price' segment (window-I), the existing mechanism for grant of coal linkage to central sector thermal power projects (TPPs), including joint ventures (JVs) and their subsidiary will continue.

Moreover, coal linkage earmarked to states may be utilised by states in their genco, Independent Power Producers (IPPs) to be identified through Tariff-Based Competitive Bidding (TBCB) or existing IPPs having PPA for setting up of a new expansion unit under window-I.

"The Central Sector Thermal Power Projects (TPPs) shall continue to get coal linkage on nomination basis on the recommendation of Ministry of Power, whereas, the linkages earmarked to the States on nomination basis on the recommendation of Ministry of Power may be utilised by the States in the State Generating Company," the statement added.