Revised SHAKTI Policy 2025 – UPSC Notes

Revised SHAKTI Policy 2025 is a big initiative of the Ministry of Coal where they plan to transform coal distribution and coal linkage mechanism in India. Coal remains the pillar of energy generation in India, an effective and transparent flexible coal allocation structure is the need of the hour. This policy has a direct effect on the power sector in India, public-private investments, energy security, as well as, the sustainable development objectives.

The Revised SHAKTI Policy 2025 is an area of high potential interest to the aspirants of UPSC and specifically, in Prelims, GS Paper III (Energy and Infrastructure), andGS Paper II (Governance). It also plays a role in the discussions of the interview in relation to resource management and policy reforms.

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What is the SHAKTI Policy?

SHAKTI stands for Scheme for Harnessing and Allocating Koyla Transparently in India. It was first introduced in May 2017 to ensure transparent coal allocation to thermal power plants (TPPs) through competitive bidding and efficient linkages.

The policy was born from the need to address fuel supply bottlenecks in the power sector after the deallocation of coal blocks by the Supreme Court in 2014. SHAKTI provides long-term fuel supply arrangements through auction or allocation routes for independent power producers (IPPs) and state utilities.

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The Revised SHAKTI Policy 2025 supplements the framework adopted in the year 2017 with added transparency, flexibility, and responsiveness to the market. It has the following key features:

• Introduction of the Linkages Coal Exchange based
• Digital auction systems that are based on technology
• Efficiency gives options to power plants to change coal sources
• Medium and short-term linkages to greater flexibility
• Renewable-integrated thermal plants Inclusion
• Incentives on coal washing and use of low-ash Government has been giving incentives on coal washing and the use of low-ash

Objectives of the SHAKTI Policy

The reformed policy is supportive of various national interests, among them:

• Ensuring Coal Security: Ensuring the continuity of supply of coal in power generation.
• Realizing Economies: The saved costs on transport owing to flexibility in sourcing.
• A clearer picture of coal: Minimizing the discretion about the coal reference.
• Boosting Competition: Separation between fair and unfair price discovery through the application of auction.
• Improvement of clean coal and low emissions: Righteousness.
• Liberating Market Reforms: As part of the vision of a national energy market that is conciliatory.

Major Amendments in SHAKTI Policy 2025

Here are the SHAKTI Policy amendments that mark a shift in coal linkage policy:

• Introduction of Coal Exchange Mechanism: Similar to power exchanges, this will allow day-ahead, monthly, and long-term coal trading.
• Short-Term Linkages: 1–3 year contracts allowed for better adaptability.
• Renewable-Coal Hybrid Projects: Thermal power plants integrated with renewable capacity eligible for coal.
• Deemed Generation Clause: Ensures cost recovery for TPPs during coal shortages.
• Relinquishment Option: Allows TPPs to exit contracts under specified conditions.
• Digital Auction Portal (CMPDI): End-to-end digital interface for registration, bidding, allocation, and performance monitoring.

Benefits of the Revised SHAKTI Policy 2025

Power Sector Stability

Reduced coal shortages and improved coal availability ensure grid stability.

Lower Tariffs

Flexible sourcing and short-term contracts reduce generation costs and tariffs for DISCOMs.

Attracts Private Sector Participation

Transparent processes build investor confidence in thermal power.

Promotes Sustainability

Encourages low-ash, high-GCV coal usage and better environmental performance.

 Boosts Renewable Integration

Policy now accommodates RE+Coal hybrid plants, aiding clean energy transition.

Impact on the Power Sector

• Improved Operational Efficiency: Power generators are now in a position to have the best mix and transportation of fuels.
• Restructuration of distressed Power sector: Short-term interconnections hold promise of restructuring of the stranded or NPAs in the power sector.
• Discom Relief: Uncertainties in pricing and decreased delivery of power to the DISCOMs lead to reduced load shedding distress of the State DISCOMs.
• Job Creation: Greater use of the capacity of TPPs and new infrastructure investments.

Challenges & Criticisms of the Revised SHAKTI Policy

Despite its advantages, several challenges persist:

1. Execution Delays: Past auctions have been marred by delays in contract execution.
2. Lack of Demand Forecasting: TPPs often overestimate coal requirements, causing inefficiencies.
3. Environmental Concerns: No strong push for decarbonization or mandatory coal washing.
4. State-Centre Coordination: Overlapping regulatory roles create friction.
5. Limited Infrastructure: Railway logistics, washeries, and ports still need upgradation.

Comparison of SHAKTI Policy 2017 vs 2025

SHAKTI Policy 2017 to SHAKTI Policy 2025 shows the transition in the long-term fuel supply, which was harsh to share the dynamic and fluid market-based basis of coal allocation arrangement. The new policy provides a competitive price nature, removes the weaknesses of the old model, promotes renewable integration, and cites technology-led governance. The similarities and the differences were as follows:

Conclusion

Revised SHAKTI Policy 2025 is an ambitious effort to put in place competitive, high-efficiency, environmentally friendly coal linkage schemes. It combines the prevalence of control with the market mechanism to reach energy security, stability of power, and sustainable development. To the UPSC students, the policy is an indicator of the changing trend of energy governance in India, and it needs to be evaluated in association with infrastructure, economy, environment, and cooperative federalism.