Piles of coal stand near a rail yard at the coal-fired NTPC (Prashanth Vishwanathan/Bloomberg)

Cabinet Gives ‘SHAKTI’ To Power Sector

The Cabinet Committee on Economic Affairs on Wednesday approved the new coal linkage policy, which will help power producers ensure fuel supplies in an organised manner.

The new policy, named ‘SHAKTI’ or Scheme for Harnessing and Allocating ‘Koyla’ (coal) Transparently in India, will ensure transparency and coal linkages and reduce power costs to consumers, Power Minister Piyush Goyal told reporters after the Cabinet meeting in New Delhi.

Power plants with capacity of 28,000 MW and are under various stages of completion and have a Letter of Assurance will be able to sign a Fuel Supply Agreement (FSA) with Coal India as and when they commission their plants.
Piyush Goyal, Minister of State (Independent Charge), Coal, Power and Renewable Energy

Another reason behind the policy was to minimize the use of imported coal across various power plants. “It is a shame that the previous government never thought of becoming self-sufficient in terms of domestic coal,” Goyal said.

Companies such as NTPC Ltd. and Bharat Heavy Electricals Ltd. are working towards reducing the usage of imported coal and promote more domestic orders, he added.

Goyal said that signing of the fuel supply agreement (FSA) will also help banks that have exposure to the power sector resolve their non-performing asset issues.

Plants that have power purchase agreement (PPA) but have not signed an FSA will have to bid for the same through an auction, according to the policy. “The plants will have to bid for the discount that they will offer to the discoms (power distribution companies). That discount will directly be credited to the discoms,” Goyal said.

A ‘forward auction’ will be carried out for those plants that do not have a PPA but are installed. “Such plants will bid to offer premium to the coal companies,” the minister said.

Other Key Decisions

In addition to the coal linkage policy, some of the other key decisions taken by the Cabinet are:

  • To install 10 indigenous Pressurised Heavy Water Reactors (PHWR), with a collective capacity of 7,000 MW under the Prime Minister’s Clean Energy Mission.
  • Setting up an Indian Agricultural Research Institute in Assam at an initial cost of Rs 155 crore.
  • Four-laning of Porbandar-Dwarka section of National Highway-8E in Gujarat at an estimated cost of Rs 1,958.88 crore to be jointly shared by the central and state government. The project will be carried out under the hybrid annuity model.
  • Electrifying and doubling the Guntur-Guntakal route in Andhra Pradesh at an estimated cost of Rs 3,631 crore on a 50:50 cost-sharing basis
  • Construction of an electrified third line in Manmad-Jalgaon route in Maharashtra at a cost of Rs 1,198.92 crore. The project is likely to be completed in the next five years.
  • Electrification and doubling of the line between Phephana-Indara and Mau-Shahganj in Uttar Pradesh at an estimated cost of Rs 1,190.98 crore.