India Energy Subsidy

The document outlines proposed amendments to India's Electricity Act 2003 to introduce direct benefit transfers for subsidies and promote renewable energy. It notes a government ambition to increase its renewable energy target to 225 GW by 2022, though external analysts are less optimistic. The report highlights a rising fiscal burden from oil subsidies, potentially reaching USD 7.4 billion in FY2019, and details significant financial stress in the power sector. Additionally, it covers the expansion of LPG connections for poor women and the transition of several states to become kerosene-free.

• Proposed amendments to the Electricity Act 2003 include the creation of a legal basis for direct benefit transfer (DBT) for electricity subsidies, where payments are made to consumers' bank accounts instead of electricity companies. Other proposals include penalties for Power Purchase Agreement (PPA) violations up to INR 1 crore, allowing multiple distribution licensees in one area, and requiring licensees to connect electricity to premises within seven days.
• The Indian government believes it will exceed its 175 GW renewable energy target by 2022 and may raise the target to 225 GW, potentially requiring USD 50 billion in new investment. However, Wood Mackenzie projects that India will only achieve 76 per cent of the original 175 GW target by 2022 due to challenges such as equipment duties and cancelled auctions.
• High crude oil prices, which peaked at USD 80 per barrel in early November, are increasing the fiscal burden of oil subsidies. Moody's estimates the petroleum subsidy burden could reach INR 53,000 crore (~USD 7.4 billion) for FY2019 if prices average between USD 60 and USD 80 per barrel.
• India's power sector is described as "highly stressed," with nearly INR 1 trillion in bad or recast loans. Approximately 66 GW of capacity is under financial stress, including 55 GW of coal-based power, 6.8 GW of gas-based power, and 4.6 GW of hydropower.
• The Pradhan Mantri Ujjwala Yojana (PMUY) program, which provides deposit-free LPG connections to women below the poverty line, has increased its target from 5 crore (50 million) to 8 crore (80 million) women, with an additional budget of INR 4,800 crore (USD 669 million). NITI Aayog has suggested transitioning this to a fuel-agnostic "cooking subsidy" to encourage the use of biogas in rural areas and piped natural gas in urban areas.
• Eight states or Union Territories have become kerosene-free, with Andhra Pradesh, Dadar-Nagar Haveli, Daman-Diu, and Puducherry not requesting subsidized kerosene in the first quarter of FY2019. Previously, Chandigarh, Delhi, Haryana, and Punjab had stopped such allocations.
• Solar tariffs in India reached record lows of INR 2.44 per unit in 2017 and 2018, leading to concerns about sector viability. The Ministry of New and Renewable Energy (MNRE) proposed a tariff cap of INR 2.68 per unit (including safeguard duty), which industry associations argue may negatively impact project viability.

APA

International Institute for Sustainable Development (2018). India Energy Subsidy. https://www.iisd.org/system/files/publications/energy-subsidy-briefing-note-december-2018.pdf

Chicago

International Institute for Sustainable Development. India Energy Subsidy. 2018. https://www.iisd.org/system/files/publications/energy-subsidy-briefing-note-december-2018.pdf.

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=India Energy Subsidy |date=December 2018 |url=https://www.iisd.org/system/files/publications/energy-subsidy-briefing-note-december-2018.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{internationalinstituteforsustainabledevelopment2018india, author = {{International Institute for Sustainable Development}}, title = {{India Energy Subsidy}}, institution = {International Institute for Sustainable Development}, year = {2018}, month = dec, url = {https://www.iisd.org/system/files/publications/energy-subsidy-briefing-note-december-2018.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }