Revised SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) Policy for Coal Allocation

Syllabus: GS3/Economy

Context

• The Cabinet Committee on Economic Affairs (CCEA) has accorded its approval for the Revised SHAKTI (Scheme for Harnessing and Allocating Koyala Transparently in India) Policy for Coal Allocation to Power Sector.

SHAKTI Policy

• It was introduced in 2017 and there was a paradigm shift of the coal allocation mechanism from a nomination-based regime to a more transparent way of allocation of coal linkages through auction / tariff-based bidding. 
• The current revision with innovative features will further enhance the scope and impact of the SHAKTI policy and support the power sector through:
  • Greater flexibility
  • Wider eligibility and
  • Better accessibility to coal.
• It will ensure coal linkage to all power producers leading to generation of more power, cheaper tariffs and an overall positive impact on the economy.

Coal Sector of India

• Production: India surpassed one billion tonnes of coal production in FY 2024-25, with a 4.99% growth in output compared to the previous year.
  • India is the second largest coal producing country globally.
• Import: Imports decreased by 8.4%, leading to substantial foreign exchange savings and a reduction in import dependency.
• Importance in Energy Mix: With the fifth-largest coal reserves and as the second-largest consumer, coal remains crucial, contributing 55% to the national energy mix and fuelling over 74% of total power generation. 
• Coal Fields: The major coal fields in India are located in the eastern states of Jharkhand, Odisha, and West Bengal, as well as in central states like Chhattisgarh and Madhya Pradesh.

Key contributions:

• Railways & revenue: Coal stands as the single largest contributor to railway freight, with an average share of nearly 49% of total freight income.
• Government earnings: The coal sector contributes over Rs. 70,000 Crore annually to the central and state governments through royalties, GST, and other levies. 
• Employment: The sector provides jobs to over 239,000 workers in Coal India Ltd and thousands more in contractual and transport roles.

Challenges Faced by the Coal Sector of India

• Environmental Impact: The coal sector faces significant environmental challenges, including air pollution, greenhouse gas emissions, and the impact of coal mining on local ecosystems and communities.
• Dependence on Coal Imports: Despite being the world’s 5th largest coal reserve holder, India still imports significant quantities of coal (especially coking coal for steel and high-GCV thermal coal).
  • Import dependency increases foreign exchange outflow and vulnerability to global price volatility.
• Slow Environmental Clearances & Land Acquisition: Delays in forest/environmental clearances and land acquisition hinder timely development of coal blocks.
• Underutilization of Mining Capacity: Coal India and other miners often operate below capacity due to demand uncertainties, regulatory hurdles, and infrastructure delays.
• India’s Green Commitments: Coal is the most carbon-intensive fossil fuel. India’s commitment to global climate goals (e.g., Paris Agreement, Net Zero by 2070) puts pressure to reduce coal dependency.
• Low Private Sector Participation: Despite reforms, coal mining remains dominated by PSUs (Coal India Ltd. and SCCL), limiting competition and innovation.

Government Initiatives for Coal Sector in India 

• Commercial Coal Mining: Launched in 2020, allowing private companies to mine coal for commercial sale without any end-use restrictions.
  • Encourages competition, improves supply efficiency, and aims to reduce import dependency.
• Single Window Clearance Portal: Launched in 2021 to provide a centralized platform for obtaining all approvals and clearances (e.g., land, forest, environmental) for coal mining projects.
  • Aims to streamline project execution and reduce delays.
• Auction of Coal Blocks for Non-Regulated Sectors: Coal blocks are regularly auctioned for use in sectors like steel, cement, and aluminum, promoting diversified usage.
• Coal Gasification and Liquefaction Promotion: The government aims to gasify 100 million tonnes of coal by 2030.
  • Promotes cleaner usage of coal and aligns with India’s energy transition goals.
• Technology & Automation Push: Use of drone surveillance, GPS tracking, online coal sale portals, and automated loading systems in mines.
  • Enhances transparency, safety, and production tracking.
• Coal Logistics Reforms: Development of coal corridors, dedicated freight corridors, and first-mile connectivity projects to improve coal evacuation.
• Coal Allocation to Small Consumers: Through e-auctions, even small and medium enterprises can now access coal at market-determined prices.

Conclusion

• While coal will continue to play a vital role in India’s energy landscape in the near to mid-term, a balanced and strategic transition towards cleaner energy sources is essential. 
• The Ministry of Coal is strengthening domestic production to enhance energy security and advance Viksit Bharat, ensuring a self-reliant, sustainable energy framework for long-term growth.

Source: PIB