India since 2010 has made significant progress in reforming fossil fuel subsidies through the ‘removal’, ‘targeting’, and ‘replacement’ approach, the Asian Development Bank (ADB) said in a new report.
“By carefully measuring the combined effect of three key policy measures – prices, tariffs, and subsidies on selected fuel products – the country was able to reduce its financing of the oil and gas sector by 85 percent, from an uncontrollable amount of USD 25 billion in 2013 to -USD 3.5 billion in 2023,” he said.
In its ‘Asia-Pacific Climate Report’, ADB said that India phased out petrol and diesel subsidies (from 2010 to 2014) and increased tariffs (from 2010 to 2017), which created fiscal space to increase government support for renewable energy, electric vehicles, and the strengthening of electrical infrastructure.
“Additional revenue from the increase in petrol and diesel tax from 2014 to 2017, a period of low international crude oil prices, was also redirected to improve access and targeted subsidies to increase the use of liquefied petroleum gas (LPG) among the rural poor, ” said.
LPG subsidies have grown and “may now require efforts to improve identification and include non-fossil cooking alternatives,” he said.
From 2010 to 2017, the Government of India introduced a cess (tax) on coal production and imports. About 30 percent of the money collections go to a national clean energy and environment fund that supports clean energy projects and research.
ADB said the agreement contributed significantly to strengthening the Ministry of Renewable Energy’s budget between 2010-2017 and provided the initial funding for the country’s Green Energy Corridor and National Solar Mission programs, which helped reduce the cost of solar energy use. power and support many off-grid renewable energy solutions.
“However, with the introduction of the Goods and Services Tax (GST) in India after 2017, coal production and import compensation was subsumed under the country’s GST compensation agreement, the flow of which was redirected to compensate states for the loss of GST-related revenue. . new tax system,” he said.
As a result of changes in India’s subsidy and taxation systems, the country’s fossil fuel subsidies decreased from 2014 to 2018.
“Its renewable energy subsidies also peaked in 2017 but are now increasing again, with major support programs targeting solar parks, state-owned enterprises (SOEs), and renewable energy distribution,” the report said.
