Policy Approaches for a Kerosene to Solar Subsidy Swap in India

The report argues that shifting subsidies from kerosene to off-grid solar is economically viable and socially beneficial for India's rural poor. It details three primary subsidy pathways—targeting households, manufacturers, or financial institutions—and provides a framework for administration, funding, and beneficiary targeting to achieve '24x7 Power for All'.

• Off-grid solar products are more cost-effective than subsidized kerosene over their lifespan. For example, a solar lantern has a levelized monthly cost of INR 54, compared to a total cost of INR 183 for subsidized kerosene (including household expenditure and government subsidy), resulting in a net swap saving of INR 129 per month per household.
• Despite near-universal grid connection, significant gaps in electricity access persist. A survey found that 86 per cent of grid-connected households use another source of electricity or lighting, and in some village surveys, the majority of connected households received only one to five hours of electricity per day.
• Continued reliance on kerosene poses health and fiscal risks. Kerosene produces pollutants exceeding World Health Organization guidelines and is subject to volatile international oil prices; in FY 2018/19, central government spending on cooking gas and kerosene subsidies was 84 per cent higher than budget estimates.
• There is strong consumer demand for the transition. The ACCESS survey indicated that 84 per cent of households support government subsidies for solar lanterns even if it means reducing kerosene subsidies.
• Kerosene subsidies are prone to significant leakage, with an estimated 45 per cent of subsidized kerosene diverted to the black market for use in transport or irrigation.
• The report identifies three viable subsidy pathways: direct payments to households (maximizing choice), subsidies to manufacturers (reducing administrative costs and ensuring quality), or subsidies to banks and microfinance institutions (improving affordability of loans).
• A subsidy swap would support India's climate and energy goals, specifically its target of 175 GW of renewable energy by 2022. Kerosene accounted for approximately one quarter of all energy-related residential greenhouse gas emissions in 2013.

APA

Laan, T., Viswanathan, B., Beaton, C., Shardul, M., Gill, B., & Palit, D. (2019). Policy Approaches for a Kerosene to Solar Subsidy Swap in India. International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/india-kerosene-solar-swap.pdf

Chicago

Laan, Tara, Balasubramanian Viswanathan, Chris Beaton, Martand Shardul, Bigsna Gill, and Debajit Palit. Policy Approaches for a Kerosene to Solar Subsidy Swap in India. International Institute for Sustainable Development, 2019. https://www.iisd.org/system/files/publications/india-kerosene-solar-swap.pdf.

Wikipedia

{{cite report |last1=Laan |first1=Tara |last2=Viswanathan |first2=Balasubramanian |last3=Beaton |first3=Chris |last4=Shardul |first4=Martand |last5=Gill |first5=Bigsna |last6=Palit |first6=Debajit |title=Policy Approaches for a Kerosene to Solar Subsidy Swap in India |publisher=International Institute for Sustainable Development |date=April 2019 |url=https://www.iisd.org/system/files/publications/india-kerosene-solar-swap.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{laan2019policy, author = {Laan, Tara and Viswanathan, Balasubramanian and Beaton, Chris and Shardul, Martand and Gill, Bigsna and Palit, Debajit}, title = {{Policy Approaches for a Kerosene to Solar Subsidy Swap in India}}, institution = {International Institute for Sustainable Development}, year = {2019}, month = apr, url = {https://www.iisd.org/system/files/publications/india-kerosene-solar-swap.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }