8 Jan 2020

SHAKTI Policy  2 min read

Source: PRS India

Methodology for auction of short term coal linkages under the SHAKTI policy released.  

Background 

The Ministry of Power had constituted a High-Level Empowered Committee to resolve issues related to stressed thermal power assets in July 2018. The Union Cabinet approved some of the Committee’s recommendations in March 2019. One of the recommendations of the Committee was to provide short-term coal linkage to power plants that do not have power purchase agreements (PPA). This short-term linkage will be provided under the SHAKTI policy

About SHAKTI scheme

  • The SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) policy was approved in May 2017 with the intent of better allocation of coal to present and future power plants. 
  • It aimed to phase out the present Letter of Assurance and Fuel Supply Agreement (FSA)-based regime, and instead introduce a more transparent and competitive coal allocation policy
  • The policy also offered a potential solution to the lack of coal linkages to 17 power plants with a capacity of about 15,000 MW, which were part of the 34 power plants (of about 40,000 MW) declared as stressed.
  • The policy was amended in March 2019 specifically to aid stressed projects based on the recommendations of a High-Level Empowered Committee.

Key features of the methodology are:

 

  • Eligibility: All power plants, except captive power plants, which have at least 50% untied capacity (generation capacity without PPAs) will be eligible to participate in the auction for short-term linkage.

 

  • Duration of linkage: Coal linkages will be provided for the consumption of coal by the power plant for a period of three months.  
  • Periodicity of the auction: Auction of coal linkages will be carried out every quarter. 
  • An annual calendar will be published by the coal companies in this regard.  
  • Methodology for bidding: The coal company will conduct a competitive bidding process. The bid for the auction will include a premium above the notified price of coal.  
  • Conditions on the use of power: The power generated under these coal linkages will have to be sold in the day-ahead market through power exchanges, and short term through a transparent bidding process using the Discovery of Efficient Energy Price (DEEP) portal. 

 

  • The DEEP portal is an e bidding and e-reverse auction portal for procurement of short term supply of power by distribution companies.


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