Over the past decade, India has made meaningful progress on fossil fuel subsidy reform, with fossil fuel subsidies declining by 59% since 2014—an accomplishment that many other large economies have failed to achieve. However, the 2022 energy crisis—together with India’s growing energy demand— has led the country to put in place measures that may unwind this hard-won progress. Like many countries, with an aim to protect low-income households, India responded to peaking fossil fuel prices in 2022–23 by capping retail prices of petrol, diesel, and domestic liquefied petroleum gas (LPG), cutting taxes, providing direct budgetary transfers to businesses and consumers, and supporting existing energy supplies. However, untargeted fossil fuel subsidies are generally highly inefficient at supporting low-income households, and they shrink the fiscal space available to support emerging clean energy technologies, undermining the energy transition. While these subsidies remain below their historic peak in 2013, without further policy reform, their resurgence is concerning and can have important budgetary impacts. Our latest estimates show that fossil fuel subsidies remained five times the subsidies for clean energy in fiscal year (FY) 2022– 23 .
India is positioning itself to become a USD 5 trillion economy in the next 3 years (up from USD 3.7 trillion in FY 2024) and taking bold steps to decouple this economic growth from greenhouse gas (GHG) emissions. For this, in the Union Budget 2023–24, the government set an agenda to deliver economic growth, energy access, energy security, and decarbonization through “green growth ” by allocating INR 35,000 crore (USD 4.4 billion) for priority capital investments toward energy transition and net-zero objectives .
In 2023, India also demonstrated leadership by steering the G20 under its Presidency to a common goal of tripling global renewable energy capacity globally by 2030. However, the country’s rapidly increasing energy demand has also led it to adopt a hybrid approach, bolstering all forms of energy supplies in 2023. Our estimates show that this has led total energy subsidies to surge to a 9-year high of INR 3.2 lakh crore (USD 39.3 billion) in FY 2023 (see methodology note for details). In FY 2023, both clean energy and fossil fuel subsidies grew by around 40%, with subsidies for renewable energy and electric vehicles growing slightly faster. The government also announced several new initiatives during this period for promoting emerging sectors such as green hydrogen, battery storage, and offshore wind. Despite this, clean energy subsidies remained less than 10%, while subsidies for coal, oil, and gas contributed around 40% of total energy subsidies. Most of the remaining subsidies were for electricity consumption.
Ongoing high levels of public financial support for fossil fuels not only undermine emission reduction goals but also perpetuate dependence on price-volatile and geopolitically risky fossil fuels, which weakens energy security and affordability. Shifting support from fossil fuels to clean energy in a socially responsible manner provides a long-term solution to the Government of India’s energy objectives and is consistent with India’s commitment to achieving 50% cumulative electric power installed capacity from non-fossil sources by 2030, energy independence by 2047, and net-zero emissions by 2070.
To support its consideration of these issues, Mapping India’s Energy Policy provides the latest estimates on public financial support for energy in India, using a detailed review of a decade of data (FY 2014–FY 2023) for the first time.
