India reduced its energy subsidies by over $15 billion (over Rs 82,000 crore) between 2014 and 2016, a new report by the International Institute of Sustainable Development (IISD), the Overseas Development Institute and ICF India said on Friday.
The total value of energy subsidies from the central government has declined substantially during this period from Rs 216,408 crore ($35.8 billion) to Rs 133,841 crore ($20.4 billion).
The report said the decline could be because of India’s reforms to curb wasteful consumption in oil and gas subsidies as well as due to the decrease in global oil prices.
“While the decline is significant, subsidies still favour fossil fuels much more than renewables. This is not well aligned with several government objectives, reducing harmful air pollution and tackling climate change through its Nationally Determined Contribution (NDC), both of which require less fossil fuel use, particularly coal, and more renewables,” IISD researcher Vibhuti Garg said.
The government is gradually transitioning its support to favour renewables, but more could be done. With the introduction of the Good and Services Tax (GST), it isn’t clear how some fossil fuel subsidies will go up or down, and there is still a very incomplete picture of state-level subsidies. To make informed decisions, policy-makers need ongoing transparency on these issues,” Garg said.
The report revealed that India has been steadily increasing central government subsidies on electricity transmission and distribution, while reducing subsidies on oil and gas over the last three years.
The central government subsidies for electricity transmission and distribution increased from Rs 40,331 crore ($6.7 billion) in 2014 to Rs 64,896 crores ($9.9 billion).
In 2016, transmission and distribution became the main recipient of energy subsidies in India. These sums do not include the even larger volume of state government subsidies that have been provided through the government’s UDAY program, which provided an additional Rs 170, 000 crore ($25 billion) over 2016 and 2017.
The total subsidies to coal mining and coal-fired electricity have remained stable to a slight decline over the reviewed years and amounted to Rs 14,979 crore ($2.3 billion) in 2016.
Changes in tax subsidies due to the introduction of the GST make it difficult to ascertain if coal subsidies will go up or down in 2017.
Subsidies to renewables have significantly increased from Rs 2,607 crore ($431 million) in financial year 2014 to Rs 9,310 crore ($1.4 billion) in financial year 2016.
As a member of the G20, India committed in 2009 to “phase out inefficient fossil fuel subsidies that encourage wasteful consumption while providing targeted support for the poorest.”
Overall, the scale of support to fossil fuels (coal, oil and gas) has remained more significant than subsidies to renewables through the entire reviewed period.
“Though there have been significant positive changes in terms of a decline in India’s subsidies to oil and gas consumption, there is still very limited transparency in terms of subsidies provided to the energy sector,” co-author and researcher with Overseas Development Institute Shelagh Whitley said.