Energy Subsidies in India

The Government of India launched the Direct Benefit Transfer for LPG (DBTL) scheme to provide LPG subsidies directly into consumers’ bank accounts with the aim of curbing diversion and weeding out duplicate connections. This study conducted an independent performance evaluation of the modified DBTL scheme, with a focus on assessing the efficacy of the scheme against its stated objectives and its implementation process, as well as the experiences of key stakeholders with the scheme’s implementation and impact. The report unravels the difficulties faced by different stakeholders and puts forward suggestions for reforms. Finally, it provides insights into the lessons learned from the scheme’s implementation. The study surveyed 1,270 households and 92 LPG distributors, interviewed field officers and bank managers, officials at the oil marketing companies and the Ministry of Petroleum and Natural Gas (MoPNG).

For the past 60 years kerosene in India has primarily been available as a subsidized commodity for households as an affordable cooking and illumination (lighting) fuel. The report finds that subsidizing kerosene fails to meet the objective of providing affordable cooking and lighting service to households. There is a clear case for alternatives to replace kerosene for its end services that could include any of the following: off-grid lighting, clean cooking provision or a direct benefit transfer for kerosene (DBT-K).

India has the world’s largest concentration of population using biomass with inefficient stoves—about 840 million people in India rely fully or partially on traditional biomass for cooking. This report explores the issues and challenges of clean cooking in urban India through a case study of the Ghaziabad Municipal Corporation in Uttar Pradesh. The report analyzes results from a survey of 250 households in Ghaziabad district which yielded statistics and insights on clean cooking coverage and accessibility, energy usage and prices and how gender is an important determinant of cleaner cooking fuels.

On 29 February 29 2016, India’s Finance Ministry released its 2016 budget, with important implications for clean and efficient energy. The budget pledges to reform subsidies and taxes provided to fossil fuels, which will do much to support renewable and more efficient energy. This is welcome as India seeks to do its part to meet the climate change commitments made in Paris last year.

In 2015, the Indian government introduced nationwide changes to the system of domestic liquefied petroleum gas (LPG) subsidies, replacing integrated consumer price subsidies with bank transfers through the Direct Benefit Transfer for LPG (DBTL) scheme.

The Government of India claims to have saved over 2 billion dollars in the first year of the operation of its direct benefits transfer scheme for LPG (DBTL). This policy brief tests this claim.

IISD-GSI is looking to identify a partner who is able to undertake consultations and advocacy with Indian Members of Parliament to promote the policy that tackles the barriers to large-scale replacement of kerosene with off-grid renewable application. This project will disseminate 3 policy briefs authored by IISD-GSI among parliamentarians. For the full terms of reference and how to apply, download the request for proposals.

This report tracks the most recent national policies on energy subsidies and analyses the government’s subsidy expenditure on different fuels – kerosene, diesel and LPG.