New Delhi, India has made remarkable progress in reforming fossil fuel subsidies since 2010 through a calibrated ‘remove’, ‘target’ and ‘shift’ approach, the Asian Development Bank (ADB) said in a new report. “By carefully balancing the combined effect of three key policy instruments – retail prices, tax rates and subsidies on selected petroleum products – the country was able to reduce its fiscal subsidy in the oil and gas sector by 85 percent, from an unsustainable peak. from $25 billion in 2013 to $3.5 billion in 2023,” the report said.
In its ‘Asia-Pacific Climate Report’, ADB says India has gradually phased out subsidies on petrol and diesel (from 2010 to 2014) and implemented incremental tax increases (from 2010 to 2017), creating fiscal space to increase government support for renewable energy, electric vehicles and strengthening the electricity infrastructure.
“The additional tax revenues from excise duty increases on petrol and diesel between 2014 and 2017, a period of low international crude oil prices, were also used to improve access and obtain targeted subsidies to expand the use of liquefied petroleum gas (LPG). ) among the rural poor,” the report said.
Subsidies for LPG have increased since then and “may now require efforts to improve targeting and develop non-fossil cooking alternatives,” the report said.
From 2010 to 2017, the Indian government introduced a tax (tax) on coal production and imports. About 30 percent of CESS collections went to a national clean energy and environment fund that supported clean energy projects and research.
ADB said the cess contributed significantly to strengthening the budget of the Ministry of New and Renewable Energy during 2010-2017 and provided initial funds for the country’s Green Energy Corridor program and the National Solar Mission, which have helped reduce the cost of utility-scale solar. energy and finances many off-grid sustainable energy solutions.
“However, with the introduction of the Goods and Services Tax (GST) in India after 2017, the freeze on coal production and imports was subsumed under the country’s GST compensation tax, the flows of which were diverted to compensate states for revenue losses incurred related to the new tax regime,” the report said.
Due to India’s subsidy reforms and tax measures, fossil fuel subsidies in the country fell sharply between 2014 and 2018.
“Renewable energy subsidies also peaked in 2017 but are now growing again, with major support schemes targeting solar farms, state-owned enterprises (SOEs) and distributed renewable energy,” the report said.
