Energy Subsidies in India

This January, Deepak Gupta, the Secretary for India’s Ministry of New and Renewable Energy (MNRE), reaffirmed plans to install 20 Gigawatts (GW) of solar power by 2022, calling it “perhaps the biggest target in the world”. This follows a number of statements made by Dr Kirit S. Parikh, the author of a government-commissioned report last year, recommending that the country “boost” solar power capacity.

In just four years the Indian government has had three high-level committees recommend how petroleum product prices should be determined. All three have shared the same general conclusions: the government should reform fuel-price subsidies and use other, more effective policies to improve the welfare of the poor. But the reality behind India's reluctance to liberalize prices is not a lack of good policy advice.

The Indian government is reportedly considering the partial reform of fertilizer subsidies in an effort to reign back its fiscal deficit.

The central Indian government began subsidizing petroleum derivatives as a result of the oil-price shocks of the 1970s, in order to soften the impact of oil price swings on the poor.

Governments spend staggering sums of money subsidizing energy—in particular fossil fuels, but increasingly also other forms of energy such as renewables.  The latest global assessment, published last year by the International Energy Agency, puts the total energy subsidy at far more than US$300 billion annually.

Two new papers by the International Food Policy Research Institute (IFPRI) reveal the results of shadow WTO notifications undertaken on China and India’s domestic subsidy policies. India’s first official notification for green box support amounted to US$ 2 billion.

When the world's richest Indian, Lakshmi Mittal, recently visited Kolkata, the city of his youth, he was thrilled to see change. Mittal told the media that the biggest difference he saw was the many flyovers dotting the city skyline and "disciplined traffic". This is great progress, he told journalists, who promptly reported that the tycoon had given the city's road and traffic management a big thumbs up.