A recent study by the Canada based International Institute of
Sustainable Development has highlighted some interesting trend in the energy
subsidies in India. The report titled "Mapping India’s Energy Subsidies
2020" examines how the Government of India (GoI) has used subsidies to
support different types of energy.
As per the findings of the report, the following five key
changes mark the shift in India's energy subsidies in recent years.
1. Oil and gas
subsidies up by over 65%. This rise—from INR 40,762 crore (USD 6.1 billion)
in FY17 to INR 67,679 crore (USD 10.07 billion) in FY19— is largely driven by
higher oil prices and growing use of subsidized liquefied petroleum gas (LPG).
2. Renewable energy
(RE) subsidies down by 35%. RE subsidies fell from a high of INR 15,313
crore (USD 2.3 billion) to only INR 9,930 (USD 1.5 billion) in FY 2019. This
reflects falling RE costs but also a slowdown driven by policy decisions such
as the solar safeguard duty and price caps in auctions. Several new, large
policies have been confirmed since FY 2019, so subsidies may rise again in
FY20.
3. Consumption
subsidies rising. Success in expanding energy access has also increased the
cost of consumption subsidies. State-level under-priced electricity is the most
costly individual subsidy policy in India, estimated at INR 63,778 crore (USD
9.5 billion). Evidence suggests it is not well targeted.
4. Coal subsidies
remain largely unchanged, and the net costs of coal are much larger than the
revenues. Total revenues from coal taxes and charges and is greater than
the total costs from coal-related subsidies, air pollution and greenhouse gas
(GHG) emissions. Even with conservative assumptions, the outcome is a large net
cost from coal. Coal subsidies are estimated at INR 15,456 (USD 2.3 billion) in
FY19 and are expected to increase significantly from FY20, given non-compliance
with deadlines to install air pollution control technology.
5. Support for electric
vehicles (EVs) has skyrocketed. EV subsidies have grown over 11 times since FY
2017. This reflects the fact that India has only very recently stepped up
its support levels for EV. Growth is expected to continue.
The report concludes that the "Recent increases in fossil
fuel subsidies and decreases in renewable energy subsidies have not yet altered
larger trends—since FY 2014, India has shifted significant public resources
toward a clean energy transition. In FY 2014, the first year from which we
track data, fossil fuel subsidies have fallen by more than half, largely driven
by falling world oil prices and policy reforms to diesel and kerosene pricing,
while subsidies for RE and EVs have increased over three and a half times,
largely due to policy efforts to meet capacity targets. EV subsidies, in
particular, have increased over 440 times from a very low baseline in FY
2014."
The report further highlights that "More remains to be
done: subsidies for fossil fuels are still over seven times larger than
subsidies for alternative energy. In FY 2019, subsidies for oil, gas and
coal amounted to INR 83,134 crore (USD 12.4 billion), compared to INR 11,604
crore (USD 1.7 billion) for renewables and electric mobility."
In light of the current COVID-19 led crisis, the report cautions
that while focusing on health and economic recovery must be the top priority,
the government must not lose sight over clean energy transition that should
reflect in coping strategies and support measures.
Next week, I shall discuss few more relevant details from the
report.
Thank you for sharing these insights. Glad to see surge in uses of gas cylinders and awareness about the importance of gas safety devices and gas regulator.
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