Context: The Asian Development Bank (ADB) has commended India for its strategic fossil fuel subsidy reforms since 2010. By adopting a phased “remove, target, and shift” approach, India significantly cut fossil fuel subsidies while bolstering its support for renewable energy and clean technology.
ADB Report on India – Key Points
- Fossil Fuel Subsidy Reduction: India decreased oil and gas sector subsidies by 85%, from $25 billion in 2013 to $3.5 billion in 2023.
- Fuel Subsidy Phase-Out: Between 2010-2014, India gradually removed subsidies on petrol and diesel, allowing for incremental tax increases (2010-2017) to create fiscal room for clean energy initiatives.
- Targeted Subsidies for LPG: Tax increases from 2014 to 2017, during low global crude prices, redirected funds to enhance LPG access for rural populations, helping reduce reliance on solid fuel.
- Coal Cess for Clean Energy: From 2010-2017, a cess on coal (approx. 30%) supported India’s clean energy fund, aiding renewable projects, solar missions, and off-grid energy solutions.
- Growth of Renewable Energy Support: Subsidies for renewable energy peaked in 2017, reflecting increased investments in clean technologies, and are rising again after a slight decline post-2018.
Relevance for UPSC Exam
- Environment & Climate Change: Demonstrates India’s initiatives in reducing fossil fuel dependence and promoting renewable energy.
- Governance & Policy: Highlights India’s strategic fiscal reforms, targeting subsidies, and redirecting funds to sustainable energy projects.
- Economy: Explores fiscal space creation through reforms, aiding in the study of subsidies and economic policy frameworks.
- International Relations: India’s commitment to clean energy aligns with global climate goals, emphasizing cooperation with international bodies like ADB.
