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Mapping India's Energy Policy 2022: Aligning support and revenues with a net-zero future report illustrative cover showing various icons

Mapping India's Energy Policy 2022

Aligning support and revenues with a net-zero future

Carefully designed energy support measures—subsidies, public utilities' investments, and public finance institutions' lending—and government's energy revenues play a key role in India's transition to clean energy and reaching net-zero emissions by 2070. Looking at how the Government of India has supported different types of energy from FY 2014 to FY 2021, the study aims to improve transparency, create accountability, and encourage a responsible shift in support away from fossil fuels and toward clean energy.

By Prateek Aggarwal, Siddharth Goel, Tara Laan, Tarun Mehta, Aditya Pant, Swasti Raizada, Balasubramanian Viswanathan, Anjali Viswamohanan, Christopher Beaton, Karthik Ganesan on May 31, 2022
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Interactive database

  • India's subsidies for renewable energy fell 59% in FY 2017-2021 as deployment has slowed and grid-scale PV solar and wind reached cost parity.

  • In India, subsidies for fossil fuels were 9 times higher than clean energy subsidies in FY 2021; they were 7.3 times higher in FY 2020. The country needs to shift support away from fossil fuels and toward clean energy technologies.

  • India's three largest public finance institutions lent three times more capital to fossil fuels than renewable energy in FY 2021. Public finance institutions must establish #NetZero roadmaps for phasing out fossil fuel finance and ramping up support for clean energy.

Mapping India's Energy Subsidies 2022 covers India’s subsidies to fossil fuels, electricity transmission and distribution, renewable energy, and electric vehicles between fiscal year (FY) 2014 and FY 2021.

We found that fossil fuels continue to receive far more subsidies than clean energy in India. This disparity became even more pronounced from FY 2020 to FY 2021, going from 7.3 times to 9 times the amount of subsidies to renewables.

Key figures:

  • India provided over INR 540,000 crore (USD 77 billion) to support the energy sector in FY 2021, including nearly INR 218,000 crore in the form of subsidies, INR 140,000 crore as investments by public sector utilities (PSUs), and at least INR 190,116 crore lent by three biggest public finance institutions to the power sector.
  • The subsidies for fossil fuels were nine times higher than clean energy subsidies in FY 2021; they were 7.3 times higher in FY 2020, yet overall fossil fuel subsidies have fallen 72% between 2014 and 2021. To reach 500 GW of non-fossil power capacity by 2030 and net-zero emissions by 2070, the country needs to shift support away from fossil fuels and toward clean energy technologies.
  • Coal subsidies fell to their lowest level since at least 2014, hitting INR 12,976 crore. To ensure affordable power for all, it is not effective to subsidize coal. The government can provide technology-neutral electricity subsidies instead.
  • Oil and gas subsidies fell 4% to INR 55,250 crore in FY 2021. India removed a major liquefied petroleum gas subsidy, before reintroducing it in a more targeted form in May 2022. Targeting, however, can still be greatly improved, and support is also needed for non-fossil cooking solutions.
  • Low-priced electricity makes up 65% of all subsidies, at INR 141,895 crore. The shift to clean energy will require cost-reflective electricity tariffs, increasing the pressure for reforms in years to come.
  • Subsidies for renewable energy fell 59% in FY 2017-2021 as deployment has slowed and grid-scale photovoltaic solar and wind reached cost parity. The government must refocus its support for clean energy technologies to reach 500 GW of non-fossil power capacity by 2030.
  • Subsidies for electric vehicles have tripled to INR 849 crore between 2017 and 2021. India announced a production-linked incentive program last year to attract investments in domestic manufacturing of electric vehicles and components.
  • In 2021, several PSUs announced new clean energy partnerships and targets, but most have not set out clear strategies for adjusting business models to clean energy transition and net-zero. In FY 2020, India’s 7 Maharatna PSUs invested 11 times more in fossil projects than renewable energy.
  • In FY 2021, annual disbursements by the largest power finance institutions were three times higher for fossil generation than renewable energy. While these institutions play a major role in shifting public finance away from fossil fuels, they have no clear strategy to adapt their lending practices to the clean energy transition.

The report is accompanied by an interactive online database to help users browse the subsidy data in detail and includes detailed spreadsheets and annexes for policy-makers and researchers. The analysis is the latest update in the India's Energy Transition series from the International Institute for Sustainable Development's (IISD) Global Subsidies Initiative (GSI) and the Council on Energy, Environment and Water (CEEW). For previous iterations of this study, see:

Report details

Topic
Energy
Subsidies
Region
India
Project
IISD Global Subsidies Initiative
Focus area
Climate
Economies
Publisher
IISD
Copyright
IISD and CEEW, 2022