Though India’s RE, EV Subsidies More Than Double in FY22, Support Low Vis-a-vis Ambition

A study entitled ‘Mapping India’s Energy Policy’ a study conducted by IISD has made significant observations about subsidies in the renewable energy and EV sector and the government support extended to these sectors by way of subsidies.

The key observations are as follows:

Subsidies for fossil fuels on the declining trend, but RE, EV subsidies see sharp push

The cumulative subsidies for coal, fossil gas, and oil stood at Rs 60,316 crore in FY 2022. They have seen a sharp decline by 76% since FY 2014. Significantly, oil and gas subsidies dropped by 28% to Rs 44,383 crore in FY 2022.

The Indian government extended support worth Rs 5 lakh crore to energy sector in FY 2022. More than Rs 2.2 lakh crore in the form of subsidies made their way in the sector.

In FY22, subsidies for government in renewable energy touched Rs 11,529 crore. In FY 2021, the subsidies provided stood at Rs 5,774 crore. Support for electric vehicles in the said period saw a 160% hike from Rs 906 crore to a record-high Rs 2,358 crore.

This increase can be attributed to more policy stability along with a 155% jump in solar photovoltaic installation. The study states, however, that to continue this trend, the government must continue to provide support by way of subsidies, public finance, and investments by publicly owned companies. This is integral to achieving 500 GW of non-fossil capacity by decade end and become net-zero by 2070.

Low support vs high ambition

However, since FY 2017, subsidies in renewable energy have slid by 59%. For EVs, on the other hand, they have witnessed a stupendous growth rate of 205%.

The study says that while the RE acceleration plans are ambitious, the support provided does not keep step with them.

New PSU Investments, but no clear targets

The study notes that a slew of PSUs made announcements about forging clean energy partnerships and targets, but “most have not set clear targets for levels of investments.” The study also mentions that state-owned energy firms are lagging behind their private counterparts, which are gathering momentum with their plans in the clean energy market.

The study recommends that ministries should direct energy PSUs to look at diversification into clean energy and “adjust corporate social responsibility rules to explicitly encourage support for sustainability and just transition.” Further, “PSUs should ramp up investment in clean energy while establishing net-zero roadmaps for phasing down fossil fuels.”