India Energy Subsidy

The document outlines India's shift toward market-driven energy pricing and targeted subsidies via direct benefit transfer. It details the draft National Energy Policy's goal to align domestic prices with international rates and the potential inclusion of petroleum and electricity under the Goods and Services Tax (GST). Key sector updates include the legal obligation for states to provide 24/7 power by March 2019, the phasing out of kerosene subsidies by 2020, and the reduction of LPG tax rates to 5% for domestic consumers. Additionally, it notes the impact of rising crude oil prices on the national subsidy burden and the declining cost of wind power through reverse auctions.

• The draft National Energy Policy (NEP) released by NITI Aayog in June 2017 proposes that energy prices be aligned with international rates, moving toward a market-driven system where subsidies are provided only to specific beneficiaries through direct benefit transfer (DBT).
• Rising crude oil prices are expected to increase the government's subsidy burden. For the 2018/19 period, the oil subsidy is projected to rise to INR 25,000 crore (USD 3.9 billion) based on an average crude oil price of USD 65 a barrel, up from the USD 55 a barrel assumed for 2017/18.
• The central and state governments are discussing incorporating electricity and petroleum products into the Goods and Services Tax (GST) to create tax uniformity and increase transparency, as current VAT on petroleum and electricity duties vary significantly across states.
• By March 2019, Indian states will be legally required to provide 24/7 power for all. Commitments include 100 per cent metering of electricity supply, with 90 per cent being prepaid meters, and the use of direct benefit transfer for subsidies.
• The government has ceased the practice of monthly price increases for subsidized domestic LPG because it reduced consumption rates, which conflicted with the goals of the Pradhan Mantri Ujjwala Yojana (PMUY). Additionally, the GST Council reduced the tax rate for household domestic LPG cylinders from 18 per cent to 5 per cent, effective January 25, 2018.
• The kerosene subsidy is expected to be phased out by 2020, driven by the targets of the Saubhagya and Pradhan Mantri Ujjwala Yojana (PMUY) schemes to achieve 100 per cent electrification and at least 95 per cent LPG penetration in households.
• The PAHAL scheme has eliminated 36 million fake connections and saved nearly INR 30,000 crore (USD 4.68 billion) in cooking gas subsidies over three financial years. The government plans to further restrict subsidies by excluding car owners from the registry.
• Wind power tariffs in India have seen a steep decline of approximately 30 per cent over 10 months, with reverse auctions by Gujarat Urja Vikas Nigam Limited (GUVNL) in December 2017 reaching a low of INR 2.43 per kWh (USD 0.04).

APA

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

Chicago

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

Wikipedia

{{cite report |author=International Institute for Sustainable Development |title=India Energy Subsidy |date=January 2018 |url=https://www.iisd.org/system/files/publications/energy-subsidy-briefing-note-january-2018.pdf |access-date=23 October 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 = jan, url = {https://www.iisd.org/system/files/publications/energy-subsidy-briefing-note-january-2018.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }