Steady Decline in Energy Subsidies (in Rs billion) - Chart Of The Day 9 January 2018 - Equitymaster

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Steady Decline in Energy Subsidies (in Rs billion)
Jan 9, 2018

The country's energy subsidy burden has come down over the past few years. As per a report by the International Institute of Sustainable Development, the value of energy subsidies the central government doled out declined by 38%, from Rs 2.17 trillion to Rs 1.35 trillion between FY 14 - 16.

During this period, India lowered its overall subsidy bill with a steep 70% cut in Oil and Gas subsidies.

The factors that partially made it possible were

  1. Significant slide in global crude prices
  2. The government's reforms such as direct benefit transfer scheme for LPG and targeted kerosene subsidy.

This is a welcome change. But the central government subsidies for transmission and distribution have recorded an over 60% rise in the last two years, making it the biggest beneficiary of India's energy subsidies in FY16. This excludes subsidies of Rs 1.7 trillion provided under the Ujwal Discom Assurance Yojana (UDAY) to bail out the cash-strapped State Electricity Boards.

Although subsidies given to the renewable segment have risen four folds, it still constitutes a miniscule 6.9% of the overall energy subsidies. This means that the lion's share of subsidies still favour fossil fuels rather than renewable sources.

However, electricity remains inaccessible to a sizeable population, and fossil fuel still dominates the energy mix in the country.

The pertinent question here is, how will India find the balance between fulfilling its energy needs while honouring its commitment towards global climate change?

Data Source: Business Standard, International Institute of Sustainable Development

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