• Subsidies to the oil & gas sector saw a reduction of 85 per cent from a peak of $25 billion in 2013 to $3.5 billion by 2023, the Ministry of New and Renewable Energy (MNRE) said.

• As per a report of Asian Development Bank (ADB), a structured approach, including adjusting retail prices, tax rates, and subsidies on select petroleum products collectively reduced fiscal subsidies in the oil and gas sector.

• A significant step in this journey was the gradual phasing out of petrol and diesel subsidies, coupled with incremental tax hikes. These reforms created fiscal space for greater government support in renewable energy initiatives, electric vehicles, and critical electricity infrastructure.

What are fossil fuels?

• Fossil energy sources, including oil, coal and natural gas, are non-renewable resources that formed when pre-historic plants and animals died and were gradually buried by layers of rock. 

• Over millions of years, different types of fossil fuels formed, depending on what combination of organic matter was present, how long it was buried and what temperature and pressure conditions existed as time passed.

• Today, fossil fuel industries drill or mine for these energy sources, burn them to produce electricity, or refine them for use as fuel for heating or transportation. 

• Fossil fuels are carbon-based and their combustion results in the release of carbon into the Earth’s atmosphere. 

• Over the past 20 years, nearly three-fourths of human-caused emissions came from the burning of fossil fuels.

• When fossil fuels are burned, they release nitrogen oxides into the atmosphere, which contribute to the formation of smog and acid rain. The most common nitrogen-related compounds emitted into the air by human activities are collectively referred to as nitrogen oxides.

• Energy from fossil fuels has helped to deliver jobs, revenue, and economic growth around the world. Consequently, most governments view coal, oil, and gas as sources of geopolitical power, energy security, and development. 

India’s fossil fuel subsidy reforms

• India’s fossil fuel subsidy reforms mark a decisive shift, channelling resources toward sustainable energy and laying the foundation for cleaner energy alternatives.

• Since 2010, India has steadily reformed its fossil fuel subsidies, adopting a “remove, target, and shift” approach.

• The petrol and diesel subsidies were phased out gradually from 2010 to 2014, followed by measured tax hikes on these fuels till 2017.

• From 2014 to 2017, tax revenues were further boosted by rising excise duties on petrol and diesel, implemented strategically during a period of low global oil prices.

• The additional revenues were then redirected toward targeted subsidies that expanded access to liquefied petroleum gas (LPG) for rural communities, addressing both environmental goals and social welfare.

• These moves were made to create fiscal year breathing room for renewable projects, allowing the government to channel funds into clean energy initiatives at an unprecedented scale.

• From 2010 to 2017, the government introduced 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.

• The cess significantly contributed to strengthening the budget of the Ministry of New and Renewable Energy during 2010-2017 and provided the initial funds for the country’s Green Energy Corridor scheme and its National Solar Mission, which helped bring down the cost of utility-scale solar energy and fund many off-grid renewable energy solutions.

• India steadily whittled down its fossil fuel support, opening doors to new investments in solar power, electric vehicles, and a stronger energy grid.

• Subsidies for solar parks, distributed energy solutions, and state-owned enterprises by the government reflects its purpose and commitment to clean power, setting a strong example for others looking to shift toward a more resilient energy future.

India’s total renewable energy capacity crosses 200 GW mark

• India has reached a significant milestone in its renewable energy journey, with the country’s total renewable energy capacity crossing the 200 GW (gigawatt) mark.

• According to the Central Electricity Authority, the total renewable energy-based electricity generation capacity now stands at 201.45 GW. 

• India is advancing toward a sustainable energy future with initiatives like the National Green Hydrogen Mission, PM-KUSUM scheme, and PM Surya Ghar: Muft Bijli Yojana. 

• These programmes aim to boost renewable energy production, enhance energy access, and empower farmers while reducing dependency on fossil fuels.

• Through these initiatives and various Production-Linked Incentive schemes, India is not only striving to meet its ambitious Net-Zero target by 2070 but also fostering a resilient and inclusive energy landscape. 

Additional Read:

India has enhanced its climate ambition manifold

India is spearheading one of the world’s most ambitious clean energy transitions and remains steadfast in its commitment to combating climate change. The energy transition plan is complemented by numerous policies intended to improve the ecosystem to deploy promising technological innovations, like green hydrogen.

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