Mapping India’s Energy Policy 2026

The report analyzes India's energy subsidy landscape in FY 2025 and FY 2026, highlighting a significant imbalance where fossil fuel subsidies are three times higher than clean energy subsidies. It details the fiscal strain on state governments due to rising electricity subsidies and the vulnerability of the national budget to global LPG and crude oil price volatility caused by conflict in the Gulf. The analysis argues for a strategic shift from recurring fossil fuel subsidies to one-time capital investments in renewable energy, electric cooking, and electric mobility to enhance energy security and fiscal sustainability.

• In financial year 2025 (FY 25), India's quantified energy subsidies totaled at least INR 4.3 lakh crore (USD 51 billion), representing 2.3% of real GDP. Of this total, 68% (INR 2.9 lakh crore) consisted of direct budgetary transfers.
• Electricity consumption subsidies provided by state governments were the largest component of energy subsidies in FY 25, reaching INR 2,40,992 crore (USD 28 billion) and accounting for nearly 58% of all energy subsidies.
• High electricity subsidy burdens are impacting state finances; in FY 25, five states—Punjab, Rajasthan, Andhra Pradesh, Karnataka, and Madhya Pradesh—spent between 9% and 20% of their state revenues on these subsidies. Punjab had the highest share at 20%.
• LPG subsidies were the largest among fossil fuel subsidies in FY 25 at INR 71,718 crore (USD 8.4 billion), making up 17% of all energy subsidies. Due to global price volatility and conflict in the Gulf, annual LPG under-recoveries for oil marketing companies (OMCs) could exceed INR 60,000 crore (USD 7 billion) in FY 2026–27 if prices remain at INR 913 per refill.
• Clean energy subsidies for electric vehicles (EVs) and renewable energy accounted for 10% of total energy subsidies in FY 25. Renewable energy subsidies peaked at INR 26,406 crore (USD 3 billion) in FY 25, with the PM Surya Ghar and PM-KUSUM schemes together representing 49% of that amount.
• To stabilize prices during the Gulf conflict, the Government of India reduced excise duty by INR 10 per litre on petrol and diesel on March 27, 2026. If maintained through FY27, this is estimated to cause revenue losses of INR 1.3 lakh crore (USD 15 billion), or 0.4% of GDP.
• Firm and dispatchable renewable energy (FDRE) is currently cheaper than the average power procurement cost of INR 5.38/kWh in 2024–25, with FDRE discovered tariffs between INR 4.76 and INR 4.77/kWh.

APA

Jain,, S. M. P. C. S. R. (2026). Mapping India’s Energy Policy 2026. International Institute for Sustainable Development. https://www.iisd.org/publications/digital-story/mapping-indias-energy-policy-2026

Chicago

Jain,, Sunil Mani,Godwin Paul Chandra Sekar,Swasti Raizada,Saumya. Mapping India’s Energy Policy 2026. International Institute for Sustainable Development, 2026. https://www.iisd.org/publications/digital-story/mapping-indias-energy-policy-2026.

Wikipedia

{{cite report |last1=Jain, |first1=Sunil Mani,Godwin Paul Chandra Sekar,Swasti Raizada,Saumya |title=Mapping India’s Energy Policy 2026 |publisher=International Institute for Sustainable Development |date=1 February 2026 |url=https://www.iisd.org/publications/digital-story/mapping-indias-energy-policy-2026 |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{jain2026mapping, author = {Jain,, Sunil Mani,Godwin Paul Chandra Sekar,Swasti Raizada,Saumya}, title = {{Mapping India’s Energy Policy 2026}}, institution = {International Institute for Sustainable Development}, year = {2026}, month = feb, url = {https://www.iisd.org/publications/digital-story/mapping-indias-energy-policy-2026}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }