Union Cabinet approved a Coal linkage policy named SHAKTI or the Scheme to Harness and Allocate Koyla (Coal) Transparently in India.
Objective: To auction long-term coal linkages to power companies.
Salient Features of the policy
a)This policy will award fuel supply agreements to coal plants already holding letters of assurance (LoAs). It is issued to new consumers on being approved by the appropriate authority, based on recommendation of a committee constituted Specific terms & conditions of the LOA to be complied with within a stipulated time period for being eligible to enter into FSA for commencing coal supply.
b)Thermal plants holding LoAs will be eligible to sign fuel supply pacts under the new policy after ensuring that all the conditions are met.
c)Coal linkages would be awarded to state-owned power distribution companies (discoms). These, in turn, would assign linkages to
I.state or central power generation companies via allocation, and
II.Private units through auction.
d)The independent power producers (IPPs) participating in the auction will bid for discounts on the existing tariff and this would be adjusted from the gross coal bills.
e)Power plants will have to give discount on their tariffs to get linkages. This could lead to under-recovery by the units, but it is still better than no fuel supply.
Benefits of the policy
a)It will ensure adequate supply of fuel to power plants, which are awaiting fuel supply.
b)It will help power producers ensure fuel supplies in a coordinated manner.
c)It is expected to reduce power costs to consumers.
d)It will cut down on the use of imported coal.
e)Fuel supply pact will help banks exposed to the power sector to cut down on NPAs.