India’s renewable energy subsidies fell 35 per cent from 2017-18 to 2018-19, while its oil and gas subsidies increased by 65 per cent, a study by the International Institute for Sustainable Development (IISD) and the Council on Energy, Environment and Water (CEEW) said on Thursday.
How the government tackles the Covid-19 crisis and economic recovery will be crucial to determining future trends in the energy sector, said experts.
The study, Mapping India’s Energy Subsidies 2020, emphasises that the health and economic crisis caused by Covid-19 will influence subsidy expenditure.
The crash in world oil prices and the government’s economic stimulus packages will be key factors shaping the energy sector in the upcoming months.
“Rising oil prices and initiatives to promote clean cooking were the main drivers of growing support to fossil fuels since FY2017,” said study co-author Vibhuti Garg of IISD.
“After the Covid-19 crisis, petroleum product subsidies will undoubtedly fall significantly in 2020 and other energy markets will be shaken. Fossil fuels are already being taxed more to help plug holes in revenue. Government stimulus needs to first help people cope, but stimulus for the energy sector must avoid new fossil fuel subsidies that lock in air pollution and greenhouse gas emissions for years to come.”
The authors of the report note that there were already signs that support for renewable energy would increase again, but with the shocks from Covid-19, it is now critical to stay on track.
“Policy decisions such as the solar safeguard duty and tariff caps on auctions meant that there was a slow-down in new capacity addition and as a result lower state subsidy outgo as well,” added Karthik Ganesan, of CEEW.