India Cut-down Fossil Fuel Subsidy By 85% In Decade, Says ADB

India has made progress on fossil fuel subsidy reform over the past decade reducing its fiscal subsidy in the oil and gas sector by 85 per cent, from an unsustainable peak of USD 25 billion in 2013 to USD 3.5 billion in 2023. Through remove, target, and shift approach and by carefully balancing the combined effect of three key policy levers—retail prices, tax rates, and subsidies on select petroleum products—India achieved success, according to a report by  the Asian Development Bank (ADB).

By gradually phasing out the subsidy on petrol and diesel (2010–2014) and carrying out incremental tax increases (2010–2017), India increased government support for renewable energy, electric vehicles, and the strengthening of the electricity infrastructure in subsequent years. 

Further report said that the additional tax revenues from excise duty increase on petrol and diesel between 2014 and 2017, a period of low international crude oil prices, also helped create the fiscal space to improve access and target subsidies for cleaner cooking alternatives by expanding liquified petroleum gas (LPG) coverage for the rural poor under the Pradhan Mantri Ujjwala Scheme.

The report mentioned that apart from the remove and target approach, with shift instrument between 2010 and 2017 in the form of a cess on coal production and imports. Around 30 per cent of the cess collections were channelled to a National Clean Energy and Environment Fund that supported clean energy projects and research; around half was used to fund clean energy projects.

The report also mentioned two phases of the Faster Adoption and Manufacturing of (hybrid and) Electric Vehicles (FAME) scheme with a budgetary outlay of around USD 1.4 billion to promote the adoption of electric vehicles in the country, which helped in reducing fuel consumption. 
ADB report highlighted that over the past decade, India’s clean energy subsidies have more than quadrupled; owing to higher household electrification, electricity subsidies have multiplied by around 2.5.