India's hybrid approach spurs surge in fossil fuel subsidies: report

Subsidies for clean energy resources only accounted for less than 10% of the total energy subsidies.

India's adoption of a hybrid approach to expand all forms of energy supply in 2023 increased subsidies for fossil fuels such as coal, oil and gas, which accounted for around 40% of the total financial support.

According to a report by the International Institute for Sustainable Development (IISD), this strategy has propelled India's overall energy subsidies to reach a nine-year high of $39.3b (INR3.2 lakh crore) for the fiscal year ending in 2023 (FY 2023).

Despite positioning itself as a global climate leader, clean energy subsidies received less than 10% of this support.

The decision to expand all forms of energy supply is a response to the 2022 global energy crisis and the ensuing challenges posed by escalating energy demands. 

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Measures to cap retail prices of petrol, diesel, and domestic liquefied petroleum gas have also contributed to a substantial increase in fossil fuel subsidies, the report said.

“Whilst fossil fuel subsidies have reduced by 59% since their peak in 2013/2014, without further targeting and a return to a market-based pricing regime, they could mount again, resulting in budgetary impacts,” said Swasti Raizada, co-author of the report and policy advisor at IISD.

“This is undesirable, as untargeted fossil fuel subsidies are an inefficient way of supporting low-income households, and they shrink the fiscal space available for supporting clean energy technologies," she added.

She pointed out that the current approach perpetuates dependence on volatile fossil fuels and delays India's clean energy goals for 2030.