Policy Approaches for a Kerosene to Solar Subsidy Swap in India

India could save money and reduce indoor air pollution by switching kerosene subsidies to solar.

Key Messages

• Switching subsides from kerosene to off-grid solar would benefit the millions of Indian households that suffer frequent blackouts or that cannot afford grid electricity.
• A range of off-grid solar products is now cheaper than kerosene over the lifespan of the technology. Surveys also indicate that people strongly prefer off-grid solar compared to kerosene, even if this means a reduction in the kerosene subsidy.
• This report shares a plan for India to swap kerosene subsidies for solar subsidies through a six-step implementation plan with the end goal of an India where there is clean and reliable power for all.

Kerosene is not an ideal fuel: it has negative health impacts, gives poor lighting, emits greenhouse gases, raises the fire risk and causes subsidy costs to soar when international oil prices rise.

Millions of households in India, however, continue to use kerosene lamps. They may not be able to afford electricity or the electricity grid has not reached their community. Electricity blackouts also drive some households to ignite their lamps.

This independent study by the International Institute for Sustainable Development (IISD) and The Energy and Resources Institute (TERI) shows that switching subsidies from kerosene to off-grid solar products would improve electricity access for households that still rely on kerosene. The costs of solar products have fallen in recent years; by spreading the initial costs over a solar product's lifetime, there are clear cost savings for households and taxpayers that justify the switch to solar.

This report provides a six-step implementation plan for governments. The first three steps provide options on funding, targeting recipients and selecting solar products. The next steps are presented as three separate pathways depending on whether the government chooses to subsidize consumers, manufacturers or financial products. The goal for each pathway is the same: to assist India’s transition to clean and reliable power for all.