India Energy Subsidy December 2018

This briefing note from the International Institute for Sustainable Development (IISD) details the state of energy subsidies and renewable energy targets in India as of December 2018. It covers proposed amendments to the Electricity Act 2003, the fiscal burden of oil and LPG subsidies, the financial stress within the power sector, and the government's ambitions for renewable energy capacity.

• In September 2018, the Ministry of Power proposed amendments to the Electricity Act 2003. These changes include establishing a legal basis for direct benefit transfer (DBT) for electricity subsidies, introducing penalties up to INR 1 crore (~ USD 140,000) for Power Purchase Agreement (PPA) violations, and requiring distribution licensees to ensure 24x7 power supply.
• The Indian government expressed confidence in exceeding its 175 GW renewable energy target by 2022, with a potential increase of the target to 225 GW. This expansion may require an additional USD 50 billion in investment. However, Wood Mackenzie projected that India would only achieve 76 per cent of the original 175 GW target by 2022.
• Volatile crude oil prices, which peaked at USD 80 per barrel in early November 2018, increased the fiscal burden of oil subsidies. Moody's estimated the petroleum subsidy burden could reach INR 53,000 crore (~USD 7.4 billion) for FY2019, the highest since FY15.
• India's power sector is described as "highly stressed," with nearly INR 1 trillion in loans becoming bad or recast. 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), launched in 2016, increased its target for providing free LPG connections to women below the poverty line from 5 crore (50 million) to 8 crore (80 million), supported by an additional budgetary provision of INR 4,800 crore (USD 669 million).
• The government's NITI Aayog suggested transitioning the LPG subsidy to a fuel-agnostic "cooking subsidy" via direct benefit transfer. The think tank argued that tying the subsidy specifically to LPG creates distortions, suggesting piped natural gas (PNG) for urban areas and biogas for rural areas.
• As of 2018, eight states or Union Territories became kerosene-free. The most recent additions were Andhra Pradesh, Dadar-Nagar Haveli, Daman-Diu, and Puducherry, joining Chandigarh, Delhi, Haryana, and Punjab.
• Solar tariffs in India reached record lows of INR 2.44 per unit (kWh) in May 2017 and July 2018. To manage this, the Ministry of New and Renewable Energy (MNRE) proposed a maximum permissible tariff of INR 2.68 per unit (including safeguard duty) or INR 2.5 per unit without the duty.

APA

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

Chicago

International Institute for Sustainable Development. India Energy Subsidy December 2018. n.d. 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 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{internationalinstituteforsustainabledevelopmentndindia, author = {{International Institute for Sustainable Development}}, title = {{India Energy Subsidy December 2018}}, institution = {International Institute for Sustainable Development}, 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} }