SHAKTI POLICY

COAL LOGISTICS
COAL DEPENDENCIES
A P R IL 05, 2024

Ashwini K Swain
 SCHEME FOR HARNESSING AND
ALLOC ATING KOYALA (COAL)
TRANSPARENTLY IN INDIA (SHAKTI), 2017

• A policy designated by the GoI for allocation of coal among TPPs in a

transparent and objective manner.
• Ensure availability of coal to all TPPs, particularly those without coal linkages
• Help public sector banks in addressing NPAs
• Reduce import of coal
• Source rationalization of coal – resulting in annual savings of INR 3,000 crore in
transportation
• Saving potential of INR 1,526 crore/year for NTPC through inter-plant rationalisation
 BACKGROUND

• Under New Coal Distribution Policy, 2007

• Letter of assurance was issued to 1,08,000 MW TPPs by 2010
• In 2013, FSA signed with 78,000 MW
• Operating under scarcity
• In adequate coal availability scenario, a new linkage allocation policy designed
based on transparent and objective criteria for optimal utilization of the
natural resource
 BENEFITS OF SHAKTI

• Coal available to Power Plants in transparent and objective manner

• Auction to be made the basis of linkage allocations to IPPs
• The stress on account of non-availability of linkages to Power Sector Projects
would be eased which is good for the Infrastructure and Banking Sector
• Direct benefit of reduction in tariff by PPA holders would go to
Discoms/consumers
• Power Plants would get long term security of supply of coal from a source of
their choice
All such power plants including private generators which do not have PPAs, shall
be allowed coal linkages under SHAKTI Policy for a period of minimum 3 months
and upto a maximum of one year, provided further that the power generated
through that linkage is sold through any product in power exchanges or in short
term through a transparent bidding process through Discovery of Efficient Energy
Price (DEEP) portal.

A methodology in this regard shall be formulated by Ministry of Power, in

consultation with Ministry of Coal. (08.11.2023 order)
 METHODOLOGY PUBLISHED ON MARCH
15, 2024

• Auction to be carried out in three separate windows – 3 months, 6 months, & 12

months
• CIL/SCCL will earmark areas/mines and publish the same on e-auction website,
sufficiently in advance before each auction
• Indicate quality of coal
• Quantum of availability
• Period of availability
• Schedule for start of supply
• Auctions to be done at regular intervals – an annual calendar to be published on
coal company website
• Who is eligible to participate?
• TPPS without PPA
• TPPs whose PPA expiring in one month
• TPPs with PPA signed, but not effective during the supply period
• Quantity of coal linkage to a power plant - not exceeding the quantity of coal
required to operate the untied capacity of the plant at 85% PLF for the linkage
duration
DURATION OF COAL LINKAGE
 COAL AND RAILWAYS

• Coevolution through the 18th century

• coal fired steam engines powered railways through the 19th century
• Expansion of railways enabled transportation of coal to demand centres
• By early 1900s, steam locomotives were gradually superseded by electric and
diesel locomotives
• By 1930s, majority of railways operation has shifted to diesel and electricity
• Steam engines mostly retired by 1980s
 COAL AND RAILWAYS IN INDIA

• About two-third of coal used by the power sector is transported by railways

• On average, railways accounts for 85% of transportation cost for coal
• Nearly half of Indian Railways’ (IR) freight revenue comes from coal
transportation
• IR’s average distance of coal transported (called “lead”) to thermal power
plants (TPPs) has been falling
• To maintain the revenue, IR has been increasing freight charges
 A REVENUE
DEPENDENCY

• Despite higher passenger

volumes on a shared network,
India has the lowest fare-to-
freight ratio—the ratio of
passenger fares and freight
charges—of 0.24, compared with
several other countries including
Japan (1.9), Germany (1.5) and
China (1.2).
• This conscious policy choice to
keep passenger fares low results
in freight overpaying its share.
• Railways today explicitly over-prices coal freight by about 31 per cent to offset its “social obligation”.
• increases the cost of power, on an average, by about 10 paisa per kWh
• Planned capacity of coal power plants is mostly either pithead or coastal.
• Coastal plants are designed for imported coal, which, although expensive per tonne, is still cheaper
after adding transportation costs and levies.
COST IR’S COAL FREIGHT
 A BLAME GAME

• Since 1960s, ministries of railways, coal and power are in a

blame game
• Lack of coordination and planning between the agencies
• The dilemma of phasing down vs reengineering logistics
 COAL LOGISTICS PLAN AND POLICY, 2024

• Launched on February 29, 2024

• A strategic shift towards a railway-based system in FMCs projects
• Aim for 14% reduction in rail logistics costs
• Annual cost savings of Rs 21,000 crores
• Expansion of RSR transportation – Rail-Sea-Rail
• Also expected to minimize air pollution, alleviate traffic congestion (10% saving in
average turn around time), and reduce carbon emissions
• Launched 15 railway projects to address connectivity gaps – 5 of these have already
been commissioned
COAL DEPENDENCIES IN INDIA
 WE HAVE COVERED

• Coal and power sectors

• Coal and railways
• Public finance
 PEOPLE AND COMMUNITIES

• A major source of employment in coal-bearing areas

• Nearly 1 million direct, indirect and induced livelihoods
• Employers - CIL, subsidiaries, MDOs
• Formal vs informal jobs
• Coal companies as proxy state
• Delivery of social infrastructure – education, healthcare, water supply & sanitation, roads,
etc.
• District Mineral Foundation Fund (DMF)
• Corporate Social Responsibility (CSR)
• Regular engagement with the public
 PEOPLE AND COMMUNITIES

• Negative externalities
• Precarious labor conditions
• Informal coal economy
• Weak labor laws and enforcements
• Contractual employment and outsourcing
• Gender exclusions
• Multiple barriers faced by women in coal economy
• Marginalization of women in coal communities
 RESOURCES AND RESTORATION

• Natural resource dependencies and degradation

• Adverse impact on forests
• Weak regulatory framework for restoration
 MONO-ECONOMY & RESOURCE CURSE

• Resource curse – a paradoxical situation in which regions underperform

economically, despite being home to valuable natural resources
• Concentration of capital and labor
• Mono-economy
• Dutch Disease
• Conflict
• Corruption
• Marginalization
• Authoritarianism
• Regional disparities
 POLITICS

• Labor mobilization
• Regional political parties and politics
• Non-state actors - Naxalite-Maoist insurgency
 Ashwini K Swain
ashwini@sustainablefutures.org
+91 8800334848