New research suggests that India needs to grow financial support for renewable energy to reach its goals for Aatmanirbhar Bharat and clean energy transition as part of the economic recovery from Covid-19.

A study titled Mapping India’s Energy Subsidies 2021: Time for renewed support to clean energy, released today by the International Institute for Sustainable Development (IISD) and the Council on Energy, Environment and Water (CEEW), finds that subsidies to renewable energy fell by 45 per cent from the fiscal year 2017 peak of ₹15,470 crore to ₹8,577 crore in FY2020.

According to IISD and CEEW experts, new funding for clean energy is crucial to progress the already underway transition in India. Researchers point to positive trends such as the increased subsidies for electric vehicles, which jumped 135 per cent from FY2019, reaching ₹1,141 crore in FY2020 due to growing public demand for electric mobility.

The report explains that renewable energy subsidies are at a standstill due to a combination of factors, including grid-scale solar and wind achieving market parity, lower deployment levels, and subsidy schemes nearing the end of their allocation period.

“It is time for a new wave of support measures focused on emerging technologies such as grid integration and storage, decentralized renewable energy, green hydrogen, and offshore wind,” says study co-author Balasubramanian Viswanathan of IISD.

“India must deploy historic levels of about 39 GW every year to meet its admirable target of 450 GW of renewables by 2030. It is hard to imagine achieving this goal without the right support policies. And the prize is big: curbing air pollution, addressing the climate crisis, and kick-starting a green economic recovery.”

Fossil fuel subsidies

Oil and gas subsidies jumped 16 per cent from FY 2019 to FY 2020, largely due to financial support for household consumption of liquefied petroleum gas (LPG).

The researchers commended the government on its commitment to successfully phase out kerosene subsidies by FY 2022, which should also reduce total oil and gas subsidies.

Overall, the study finds that support for fossil fuels has increased as of the latest year of comprehensive data, hitting ₹70,578 crore in FY 2020. This is over seven times the sum of subsidies to clean energy.

“Redirecting a share of coal tax revenues to clean energy and supporting communities, regions, and livelihoods impacted by the transition will help ensure a just and equitable energy transition,” says co-author Prateek Aggarwal of CEEW. “Further, the government should encourage public sector undertakings, which are currently investing more in fossil fuels, to set ambitious targets for high levels of investment in clean energy and establish national capacity in manufacturing.”

Now is the right opportunity for the government to support a green recovery aligned with Aatmanirbhar Bharat by designing a new generation of support measures for clean energy.