India is shifting towards a sustainable future by setting a net-zero goal for 2070 and revising its energy strategy. The country is reducing fossil fuel subsidies and investing in solar power, electric vehicles, and a stronger energy grid, with significant reductions between 2014 and 2018.
India has taken steps towards a more sustainable future in a world dominated by fossil fuels. With an ambitious net-zero goal set for 2070, the country is revising its energy strategy. According to the Asian Development Bank’s latest Asia-Pacific Climate Report, India is shifting away from an unsustainable reliance on fossil fuel subsidies and toward promoting clean energy.
Following a “remove, target, and shift” approach, India gradually reduced its reliance on fossil fuels, paving way for new investments in solar power, electric vehicles, and a stronger energy grid. India’s decision to modify fuel subsidies has been revolutionary, with subsidies lowered significantly between 2014 and 2018.
This was not a simple transition. It was implemented in stages, including the gradual elimination of petrol and diesel subsidies from 2010 to 2014, followed by regulated tax increases on these fuels until 2017. These bold moves were taken to create fiscal breathing room for renewable projects, allowing the government to invest heavily in clean energy programs.
With subsidies for solar parks, distributed energy solutions, and state-owned enterprises steadily expanding, India’s path forward demonstrates its commitment to clean electricity and sets a positive example for those attempting to move to a more robust energy future.
Since 2010, India has gradually modified its fossil fuel subsidies, adopting a “remove, target, and shift” strategy. This systematic strategy entailed carefully altering retail pricing, tax rates, and subsidies on specific petroleum products, resulting in an 85% reduction in fiscal subsidies in the oil and gas sector, from a high of $25 billion in 2013 to $3.5 billion by 2023.
The gradual phase-out of petrol and diesel subsidies, paired with modest tax increases, was a key step forward in this journey. These reforms opened up fiscal space for the government to invest more in renewable energy initiatives, electric vehicles, and key power infrastructure.
Rising excise rates on gasoline and diesel, applied strategically during a period of low global oil prices, enhanced tax revenues even more between 2014 and 2017. The additional funds were subsequently channeled toward targeted subsidies that increased rural populations’ access to liquefied petroleum gas (LPG), thereby achieving both environmental and social welfare objectives.
India’s fossil fuel subsidy reforms represent a significant shift, directing revenues toward sustainable energy while laying the foundation for cleaner energy options.
From 2010 to 2017, the Indian government imposed a coal production and import cess, which was crucial in funding clean energy programs. Approximately 30% of the proceeds from this cess were directed toward a national clean energy and environment fund, which supports a variety of clean energy projects and research. This tax greatly increased the budget of the Ministry of New and Renewable Energy, providing critical funds for initiatives such as the Green Energy Corridor plan and the National Solar Mission. These programs helped to reduce the cost of utility-scale solar energy and fund several off-grid renewable energy solutions.
However, the scenario changed with the implementation of the Goods and Services Tax (GST) in India after 2017. The coal production and import cess was merged into the GST compensation cess, transferring funds to states to compensate for revenue losses caused by the new tax regime.
This shift reflects the continuous challenges and revisions to India’s taxation regime as it seeks to support sustainable energy targets while managing the country’s complex fiscal landscape.
India is implementing initiatives like the National Green Hydrogen Mission, PM-KUSUM scheme, and PM Surya Ghar: Muft Bijli Yojana to promote renewable energy generation, energy access, and farmer empowerment. Together, they represent India’s commitment to a cleaner energy environment.
The Asian Development Bank’s Asia-Pacific Climate Report reinforces India’s commitment to transitioning to a more sustainable energy future. The report emphasizes the effectiveness of India’s “remove, target, and shift” strategy for reducing fossil fuel dependence and promoting clean energy investment.
India is working to promote a resilient and equitable energy landscape through significant projects such as the National Green Hydrogen Mission, PM-KUSUM, and numerous production-linked incentive schemes, in addition to meeting its ambitious net-zero target by 2070. Significant reductions in fossil fuel subsidies, as well as creative taxation measures to encourage clean energy projects, demonstrate the nation’s proactive strategy.
These ongoing efforts to promote renewable energy are critical for tackling climate change, supporting economic growth, and creating job opportunities. As India continues on its transformative journey, it presents a compelling example for other countries, proving that a strong commitment to sustainability can drive environmental and economic growth, as highlighted by the Asia-Pacific Climate Report.
Asian-Pacific Climate Report
The Asia-Pacific Climate Report is a new ADB initiative aimed at implementing targeted policy reforms to help Asia and the Pacific regions combat climate change. The debut issue provides a comprehensive analysis of the region’s escalating climate crisis, highlighting the increasing frequency and severity of heatwaves, along with their economic and social implications. The report emphasizes the need for adaptation measures and resource mobilization to help vulnerable communities in the region prepare for climate change challenges.
SOURCE: PIB RESEARCH AND REFERENCE
