PSU Watch logo

| Cancel bids for hydrocarbon extraction in Cauvery Basin, Stalin urges PM Modi |   | LIC looks to raise up to Rs 25,000 crore from anchor investors |   | NTPC invites EoI for Hydrogen Fuel Cell based pilot projects |   | Oil Minister defends high fuel prices citing govt spending on welfare schemes |  

India’s EV subsidies have increased by 440 times since FY14, says a new report

Since FY14, India has shifted public resources toward a clean energy transition and EV subsidies have increased over 440 times, said a report
  • The rise in EV subsidies reflects the fact that India has only very recently stepped up its support levels for EV

  • Oil and gas subsidies have went up by over 65 percent, while RE subsidies have went down by 35 percent

New Delhi: Since FY 2013-14, India has shifted significant public resources toward a clean energy transition and EV subsidies have especially increased over 440 times from a very low baseline in FY14, said a report released by CEEW Centre for Energy Finance in collaboration with IISD (International Institute for Sustainable Development). “ In FY 2014, the first year from which we track data, fossil fuel subsidies have fallen by more than half, largely driven by falling world oil prices and policy reforms to diesel and kerosene pricing, while subsidies for RE and EVs have increased over three and a half times, largely due to policy efforts to meet capacity targets,” the report said. The report maps India’s energy subsidies from FY14 to FY20, examines how subsidy policies have changed over the time period and looks at its alignment with India’s desired energy future.

Subsidies on oil & gas have went up by 65%, RE down by 35%

According to the report, oil and gas subsidies have went up by over 65 percent. This rise — from Rs 40,762 crore (USD 6.1 billion) in financial year (FY) 2017 to Rs 67,679 crore (USD 10.07 billion) in FY 2019 — is largely driven by higher oil prices and growing use of subsidised liquefied petroleum gas (LPG). Renewable energy (RE) subsidies, on the other hand, have went down by 35 percent, but is likely to rise again. RE subsidies have fell from a high of Rs 15,313 crore (USD 2.3 billion) in FY14 to only Rs 9,930 (USD 1.5 billion) in FY19. This reflects falling RE costs but also a slowdown driven by policy decisions such as the solar safeguard duty and price caps in auctions. Several new, large policies have been confirmed since FY 2019, so subsidies are expected to rise again in FY 2020, the report noted.

Coal subsidies largely unchanged

Coal subsidies have remained largely unchanged and the net costs of coal are much larger than the revenues. “We estimate total revenues from coal taxes and charges and total costs from coal-related subsidies, air pollution and greenhouse gas (GHG) emission.... even with conservative assumption, the outcome is a large net cost from coal. Coal subsidies are estimated at Rs 15,456 (USD 2.3 billion) in FY 2019 and may increase significantly from FY 2020, given non-compliance with deadlines to install air pollution control technology,” said the report.

Support for EVs has skyrocketed

According to the CEEW Centre for Energy Finance’s report, EV subsidies have grown over 11 times since FY 2017. This reflects the fact that India has only very recently stepped up its support levels for EV. It expected growth to continue in this sector.

Subsidies for fossil fuel still 7 times larger than alternative energy

Subsidies for fossil fuels are still over seven times larger than subsidies for alternative energy. In FY 2019, subsidies for oil, gas and coal amounted to Rs 83,134 crore (USD 12.4 billion), compared to Rs 11,604 crore (USD 1.7 billion) for renewables and electric mobility. Keeping this in view, the report urged the government to resist demands for new oil and gas subsidies. “Volatile world oil prices create demand for price interventions—such as a tax reduction for motor fuels in FY 2018 and FY 2019—and various support measures are being considered for natural gas. If any economic stimulus is introduced, there will be further demands to help producers. It is strongly recommended to avoid such subsidies: volatility makes them a fiscal liability; they are hard to remove once introduced; and they cause fossil energy lock-in. Investments in targeted social protection and public services can better help consumers cope with shocks,” it noted.