Mapping India’s Energy Policy 2026

The report 'Mapping India’s Energy Policy 2026' analyzes the fiscal impact of energy subsidies in India, highlighting a significant imbalance where fossil fuel subsidies were three times higher than clean energy subsidies in FY 25. It examines how electricity subsidies burden state budgets and utilities, the fiscal vulnerability caused by LPG import dependence during geopolitical crises, and the impact of fuel excise duty cuts on government revenue and EV adoption.

• 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 amount, 68% (INR 2.9 lakh crore or USD 35 billion) consisted of direct budgetary transfers.
• Electricity consumption subsidies provided by state governments were the largest component of energy subsidies in FY 25, totaling INR 2,40,992 crore (USD 28 billion) and accounting for nearly 58% of all energy subsidies.
• High electricity subsidies are straining state finances and utility viability. 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. Distribution companies (discoms) are increasingly reliant on these reimbursements, with tariff subsidies averaging 21% of discom revenues in FY 25.
• LPG subsidies were the largest among fossil fuel subsidies in FY 25 at INR 71,718 crore (USD 8.4 billion), representing 17% of all energy subsidies. Because 60% of India's domestic LPG is imported, the government is highly exposed to global price volatility; for example, Saudi Aramco LPG benchmark prices rose approximately 44% between March and April 2026.
• Oil marketing companies (OMCs) faced significant LPG under-recoveries, totaling approximately INR 33,000 crore (USD 4 billion) in FY 2024–25. By August 2025, cumulative under-recoveries exceeded INR 50,000 crore (USD 5.9 billion), leading the government to approve INR 30,000 crore (USD 3.5 billion) in compensation.
• To mitigate the impact of surging crude oil prices (which rose from ~USD 66 to ~USD 113 per barrel between February 26 and April 7, 2026), the Government of India reduced excise duty on petrol and diesel by INR 10 per litre on March 27, 2026. This intervention is estimated to cause revenue losses of INR 1.3 lakh crore (USD 15 billion) through FY27.
• Clean energy subsidies for electric vehicles (EVs) and renewables represent 10% of total energy subsidies. Central subsidies for EVs reached INR 16,812 crore (USD 2 billion) 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 accounting for 49% of that total.

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} }