India has made significant strides in reforming fossil fuel subsidies, reducing support for the oil and gas sector by 85%, from $25 billion in 2013 to $3.5 billion in 2023, according to a statement from the Ministry of New and Renewable Energy (MNRE). Following a "remove, target, and shift" strategy, India has steadily cut down on subsidies since 2010 by adjusting retail prices, tax rates, and subsidies for specific petroleum products. This transformation has freed up fiscal resources, allowing the government to invest in renewable energy and sustainable infrastructure.
Key reforms included the phasing out of petrol and diesel subsidies from 2010 to 2014, followed by tax hikes on these fuels until 2017 during periods of lower global oil prices. These tax revenues were strategically redirected to fund liquefied petroleum gas (LPG) subsidies for rural communities, aiming to support environmental and social welfare objectives.
With these subsidy cuts, India has increasingly directed funds towards clean energy projects, including solar parks, distributed energy solutions, and the expansion of electric vehicle infrastructure. This policy shift has not only enhanced renewable energy investments but has also reinforced India’s commitment to a resilient and sustainable energy future, according to a report by the Asian Development Bank (ADB).
The MNRE emphasized that India’s approach serves as a model for other countries seeking to reduce dependency on fossil fuels, pointing to an ongoing investment in clean energy solutions and grid-strengthening initiatives. The gradual subsidy reduction has laid the groundwork for an accelerated transition toward renewable energy, with fiscal room now available to support large-scale, sustainable projects.
