India’s oil and gas subsidies fell by 70% from financial year (FY) 2014 to FY 2017, according to a report released by International Institute of Sustainable Development (IISD) and the Council on Energy, Environment and Water (CEEW). The subsidy to coal power remains stable despite its pollution potential.
Though renewable energy subsidies increased six-fold during the same period, oil and gas subsidies remain three times higher than the subsidies given to renewable energy projects and electric vehicles, said the report titled “India’s Energy Transition: Subsidies for Fossil Fuels and Renewable Energy, 2018 Update”.
Fossil fuel subsidies fell from ₹173,330 crore (USD 29 billion) in 2014 to ₹52,980 crore (USD 8 billion) in 2017. This decline was largely driven by lower world oil prices during these years and reforms like deregulation of fuel prices.
There was a massive increase of ₹5,770 crore in renewable energy subsidies from 2016 to 2017, which shows that the energy mix in India is gradually changing.
In its Intended Nationally Determined Contribution (INDC) under the Paris Agreement, India committed to installing 175 GW of renewable energy capacity by 2022, and reducing emissions intensity by 33–35% by 2030 compared to 2005 levels. Changing the energy mix is key in achieving these targets, authors of the report observed.
“A growing share of subsidies is dedicated to making India’s energy mix cleaner. Despite this, subsidies to oil, gas and coal were more than three times the value of subsidies to renewables and electric vehicles in India in FY17. The government must redirect more subsidies to cleaner energy sources to achieve its goals of cutting greenhouse gas emissions and air pollution, as well as to exceed the 175 GW target for renewable power by 2022,” said Vibhuti Garg co-author of the report from IISD.
{{/usCountry}}“A growing share of subsidies is dedicated to making India’s energy mix cleaner. Despite this, subsidies to oil, gas and coal were more than three times the value of subsidies to renewables and electric vehicles in India in FY17. The government must redirect more subsidies to cleaner energy sources to achieve its goals of cutting greenhouse gas emissions and air pollution, as well as to exceed the 175 GW target for renewable power by 2022,” said Vibhuti Garg co-author of the report from IISD.
{{/usCountry}}DISCOMs got the largest share of subsidies for electricity transmission and distribution growing by nearly 50% from 2014 to 2017. The major cut was in oil and gas subsidies which declined by 76.5% between 2014 and 2017. But subsidies to coal mining and coal fired power have remained stable.
The report highlights that an important group of coal subsidies in India is linked to non-compliance with environmental norms. The largest subsidy identified in this group is the lack of penalties for non-compliance with coalwashing requirements. Unwashed coal in power generation also results in reduced efficiency of power plants, requiring coal imports to improve the overall combustion characteristics. The union environment ministry had drafted norms to reduce oxides of nitrogen (NOx), sulphur dioxide (SO2) and particulate matter (PM) from thermal power plants which were supposed to meet the norms by end of 2017. But they failed to meet the norms and now the implementation of these norms have been advanced to 2022. “Despite severe air pollution, their deadlines have been extended. This is a subsidy because it helps thermal power plants save money on installing pollution control equipment,” added Vibhuti.
About 34 coal power plants are currently defined as financially “stressed” for a variety of reasons including the absence of assured sale of power through power purchase agreements (PPA); an unsteady supply of coal leading to reliance on high-priced imports etc. The government owned banks are working on a scheme to bail them out which will also be a subsidy to the sector, authors said. The authors of the report have accessed union budget documents and multiple policy documents to arrive at these subsidy trends.
Authors urged that the government list subsidies to various sectors more transparently.