Mapping India's Energy Policy 2025

Driven by the triple imperatives of energy security, affordability, and sustainability, the Government of India is gradually bringing structural policy reforms to align public financial flows with its clean energy goals. Results are beginning to show: clean energy subsidies provided over the last decade have contributed to a fivefold growth in renewable capacity since 2014 and have raised the non-fossil share of India’s electricity capacity to cross 50% in 2025. This energy capacity shift places India among a select group of countries that have achieved one of their nationally determined contributions targets 5 years ahead of time. 

This study finds that government support for fossil fuels in India reduced to five times the size of clean energy in FY 2024—the lowest in the last 5 years. As an important form of government support, subsidies are seeing an important shift. Clean energy subsidies remain small but grew by 31% year-on-year in FY 2024, reflecting continued government support. Fossil fuel subsidy, in contrast, recorded a 12% decline—the sharpest since COVID-19—but this was due to cyclical price movements, not structural policy shifts. 

However, India's energy state-owned enterprises (SOEs) continue to invest in new fossil fuel assets, led by oil and gas investments in FY 2024. The study finds that some SOEs are beginning to diversify, although the scale remains relatively small. 

In FY 2024, fossil fuels remained a critical source of government revenue, contributing nearly INR 9 lakh crore (USD 108 billion) annually to the exchequer (16% of all government revenue─centre and state combined). Three tax measures—excise and value-added tax on petrol and diesel, and the Goods and Services Tax compensation cess on coal (now abolished) alone—contributed nearly 50% of these revenues in FY 2024. 

The study makes the following recommendations: 

1. Improve targeting of electricity subsidies: As India achieves higher levels of electrification, effective subsidy delivery—through smart metering, direct benefit transfers, and performance-linked grants to states—can help maintain affordability while containing fiscal growth in subsidy outlays. These reforms also strengthen distribution companies' finances and enable renewable energy integration through improved price signals.
2. Guide SOE capital expenditures toward clean-energy priorities: As India expands clean energy programs, SOEs can play a catalytic role by diversifying portfolios, adopting sustainability metrics, and reinvesting in emerging clean-tech supply chains. Shifting a part of SOE capital expenditures from fossil fuel expansion to clean infrastructure can accelerate India's long-term energy independence goals.
3. Build fiscal resilience through revenue diversification: Introducing next-generation measures—such as targeted carbon pricing, green taxes, and broader tax-base adjustments—can help gradually reduce reliance on volatile fossil revenues while supporting social and environmental objectives.