Coal and Mining Sector

What is SHAKTI Policy?


From UPSC perspective, the following things are important :

Prelims level: Shakti Policy

Mains level: Not Much

Ministry of Power has launched a scheme for procurement of aggregate power of 4500 MW for 5 years under SHAKTI Policy to help states that are facing power shortages and help generation plants to increase their capacities.


  • SHAKTI is an acronym for Scheme for Harnessing and Allocating Koyala Transparently in India.
  • It was launched in 2018 to provide coal to stressed power units which lack coal supply.
  • It seeks to provide coal linkages to power plants which lack fuel supply agreements (FSAs) through coal auctions.

Need for such policy

  • SHAKTI is a policy designated by the government for the allocation of coal among thermal power plants in a transparent and objective manner.
  • It aims to transfer the benefits of linkage coal to the end consumers.
  • The scheme is supposed to be beneficial not just for the infrastructure sector, but also for the public sector banks which have huge loans unpaid at the end of the power companies.
  • The companies, which did not have coal linkages before the introduction of the Shakti Scheme, would benefit when they would get domestic fuel supplies through auction at competitive rates.
  • The scheme also aims to reduce the dependence on imported coal and promote domestic industries.
  • With this policy, the government also aims to reduce dependence on imported coal.

Coal linkage scenario in India

  • Coal linkage to the power sector is governed by provisions of the New Coal Distribution Policy (NCDP), 2007.
  • Under the NCDP, a system of issuance of Letter of Assurance (LoA) was introduced.
  • The requests for Linkage/LoA are forwarded to the Ministry of Power for its recommendations.
  • The coal availability scenario has, now, emerged from scarcity to adequacy.


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