India saved $15 billion on energy subsidies in past two years: Report

Reforms to curb wasteful consumption, decreasing global oil prices triggered the trend

India has saved over $15 billion on energy subsidies in the past two years, on the back of reforms to curb wasteful consumption in oil and gas subsidies along with the decrease in global oil prices, said a report by the International Institute of Sustainable Development (IISD).

According to the report, the total value of energy subsidies from the central government has declined substantially between financial years (FY) 2014 and 2016- from Rs 2,16,408 crore ($35.8 billion) to Rs 1,33,841 crore ($20.4 billion). 

“While the decline is significant, subsidies still favour fossil fuels much more than renewables. The government is gradually transitioning in favour of renewables—but more could be done,” said Vibhuti Garg of IISD.  

The report reveals that India has been steadily increasing central government subsidies on electricity transmission and distribution, while reducing subsidies on oil and gas over the past three years. Central government subsidies for electricity transmission and distribution increased from Rs 40,331 crore ($6.7 billion) in 2014 to Rs 64,896 crore ($9.9 billion).

Source: GSI report and IISD-GSI

As a member of the G-20, India had in 2009 committed to “phase out inefficient fossil fuel subsidies that encourage wasteful consumption, while providing targeted support for the poorest.” In 2016, transmission and distribution became the main recipient of energy subsidies in India.

These figures, however, do not include the even larger volume of state government subsidies that have been provided through the government’s UDAY program that provided an additional Rs 1,70,000 crore ($25 billion) over 2016 and 2017. 

Total subsidies to coal mining and coal-fired electricity have remained stable due to a slight decline in the said period and stood at Rs 14,979 crore ($2.3 billion) in FY16. 

“Changes in tax subsidies due to the introduction of the goods and service tax (GST) make it difficult to ascertain if coal subsidies will go up or down in 2017,” the report said. Subsidies to renewables have significantly increased from Rs 2,607 crore ($431 million) in FY14 to Rs 9,310 crore ($1.4 billion) in FY16.

In 2016, around Rs 28,500 crore was collected through the Clean Environment Cess- a tax on coal whose revenues are allocated to a clean energy fund. However, out of this total sum, only Rs 9,310 crore was utilised for clean energy development. In the same year, India incurred an expenditure of Rs 14,990 crore to coal subsidies, it added.