India's oil and gas sector subsidies plunged by 85% over the past decade, falling from a peak of $25 billion in 2013 to just $3.5 billion by 2023, according to the Ministry of New and Renewable Energy (MNRE).
The ministry highlighted that, since 2010, India has been systematically reforming fossil fuel subsidies through a ‘remove, target, and shift’ strategy, as outlined in an Asian Development Bank (ADB) report. “India is shifting its focus from an unsustainable dependence on fossil fuel subsidies to fostering clean energy.”
The ministry noted that key reforms, such as gradually phasing out petrol and diesel subsidies and raising specific taxes, contributed to the fiscal reduction in oil and gas subsidies. Excise duties on petrol and diesel were increased from 2014 to 2017, taking advantage of lower global oil prices to raise government revenue. This additional revenue was funnelled into targeted subsidies to expand liquefied petroleum gas (LPG) access in rural areas, simultaneously supporting social welfare and environmental goals.
India's phased subsidy reduction represents a shift toward sustainable energy investment, paving the way for cleaner energy sources, the ministry states.
Between 2010 and 2014, petrol and diesel subsidies were gradually reduced, with measured tax hikes extending until 2017. This strategy created fiscal space to fund renewable energy projects and expand clean energy infrastructure on a larger scale. “With subsidies for solar parks, distributed energy solutions, and state-owned enterprises now steadily rising, India’s path forward reflects its purpose and commitment to clean power.”
The report highlighted India's subsidies for solar parks, distributed energy solutions, and state-owned enterprises as part of its commitment to renewable power. This approach sets a model for others seeking a resilient, clean energy future. As India steadily scaled back fossil fuel support, it also opened up opportunities for investment in solar power, electric vehicles, and an enhanced energy grid.
The Asia–Pacific Climate report seeks to help the Asia and Pacific regions tackle climate change through specific policy reforms. It underscores the critical need for adaptation strategies and stresses the importance of directing resources toward the region's most vulnerable communities, ensuring they are better equipped to handle climate-related challenges.
The findings also show that targeted tax initiatives, such as the cess on coal production, have financed renewable energy projects. Between 2010 and 2017, the Indian government imposed a cess on coal production and imports to help fund clean energy initiatives. About 30% of the revenue from this cess was directed into a national clean energy and environment fund, which supported diverse clean energy projects and research efforts.
“This tax significantly bolstered the budget of the Ministry of New and Renewable Energy, providing essential funding for initiatives such as the Green Energy Corridor scheme and the National Solar Mission. These programs were instrumental in reducing the cost of utility-scale solar energy and funding numerous off-grid renewable energy solutions,” it adds.
Moreover, oil marketing companies (OMCs) such as Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation (HPCL) reportedly experienced a huge decline in net profit during Q2 FY25, with decreases ranging from 70% to 99%. In addition to lower refinery margins, OMCs faced losses related to inventory and liquefied petroleum gas (LPG) during the reviewed quarter, which further impacted their operating profits.
