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Government Eases Coal Supply Norms to Thermal Units Amid Rising Power Demand

As India braces for a surge in electricity demand during the current and upcoming summer seasons, the Union Cabinet has approved revised coal allocation norms under the SHAKTI policy to ensure uninterrupted fuel supply to thermal power plants. The updated framework introduces two allocation windows—the first for central and state gencos at notified prices, and the second for all gencos at a premium above the notified rates.

Under Window-1, the existing system for granting coal linkages to central-sector thermal plants, joint ventures, and subsidiaries will continue. Meanwhile, Window-2 opens supply to all generating companies willing to pay a premium, expanding access to coal amid a tight supply scenario. The government will also allocate coal to states or agencies authorised by groups of states, based on recommendations from the Ministry of Power.

These measures come as part of a broader contingency strategy to prevent potential power shortages. The Central Electricity Authority (CEA) has forecast peak power demand to hit 277 GW in FY26, up from already high levels observed in FY25. India added 33 GW of new generation capacity in FY25, taking total installed capacity to 475 GW, yet rising consumption continues to stretch supply chains.

By easing coal linkage norms, the government aims to maintain grid stability and ensure power availability during high-demand periods, especially for industrial and residential consumers. This policy move also reflects a balancing act—supporting thermal capacity while continuing to push for renewable energy expansion in the long term.