New Delhi: India’s energy subsidies have soared to a record INR 3.2 lakh crore (USD 39.3 billion) in the fiscal year 2023, marking a nine-year high, according to the latest findings. The surge is attributed to the nation’s broad-based strategy to enhance its energy supply in light of the 2022 global energy crisis and its burgeoning energy needs.
This development comes as India continues to champion climate leadership on the global stage, advocating for a tripling of global renewable energy capacity by 2030 during its G20 presidency and investing in decarbonization to achieve its net-zero ambitions.
The report, “Mapping India’s Energy Policy: A Decade in Action,” by the International Institute for Sustainable Development (IISD), points out that less than 10% of the total energy subsidies were allocated to clean energy in FY 2023. In contrast, subsidies for coal, oil, and gas accounted for about 40%, with a significant portion directed towards electricity subsidies, especially for agriculture.
The increase in energy subsidies is largely a reaction to the heightened energy demands and the impacts of the international energy price crisis, spurred by Russia’s invasion of Ukraine. India implemented several measures to mitigate these impacts, including capping retail prices for petrol, diesel, and domestic liquefied petroleum gas, reducing taxes, and providing direct budgetary transfers to businesses and consumers. As a result, oil and gas subsidies witnessed a 63% increase from the previous fiscal year.
Coal subsidies also experienced a 17% rise over the same period, with coal making up 45% of India’s total primary energy supply in 2022, an increase from 43% in 2020. Consequently, fossil fuel subsidies were five times higher than those for clean energy.
Despite the economic growth propelling India towards becoming a USD 5 trillion economy by 2027, and an increase in both clean energy and fossil fuel subsidies by approximately 40% in FY 2023, concerns over the sustainability of fossil fuel subsidies persist. Swasti Raizada, Policy Advisor at IISD and co-author of the report, stated, “While fossil fuel subsidies have reduced by 59% since their peak in 2013/2014, without further targeting and a return to a market-based pricing regime, they could mount again, resulting in budgetary impacts.”
The report suggests that earmarking a portion of fossil fuel tax revenues could support India’s just transition needs. Deepak Sharma, Policy Analyst at IISD, emphasized the significance of substantial investment for India’s energy transition to be just, sustainable, and inclusive, highlighting the critical role of state-owned enterprises in this transition linked to India’s net-zero commitments.
