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PIB-Fossil Fuel to Clean Energy

India is making significant strides towards clean energy by reducing fossil fuel subsidies by 85% through a 'remove, target, and shift' strategy, as highlighted in the Asia-Pacific Climate Report by the Asian Development Bank. The country is investing in renewable energy initiatives, including solar power and electric vehicles, while implementing key programs like the National Green Hydrogen Mission. These efforts aim to achieve a net-zero target by 2070, showcasing India's commitment to sustainability and providing a model for other nations.

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17 views5 pages

PIB-Fossil Fuel to Clean Energy

India is making significant strides towards clean energy by reducing fossil fuel subsidies by 85% through a 'remove, target, and shift' strategy, as highlighted in the Asia-Pacific Climate Report by the Asian Development Bank. The country is investing in renewable energy initiatives, including solar power and electric vehicles, while implementing key programs like the National Green Hydrogen Mission. These efforts aim to achieve a net-zero target by 2070, showcasing India's commitment to sustainability and providing a model for other nations.

Uploaded by

srinivas.jupalli
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India's Green Leap: A Shift from Fossil Fuels to Clean Energy

ADB Highlights an 85% Cut in Fossil Fuel Subsidies in Latest Report

(Ministry of New and Renewable Energy)


November 4, 2024

Introduction
In a world bound to the grip of fossil fuels, India has taken steps toward a different path. With
a bold net-zero target set for 2070, the nation is reimagining its approach to energy. As noted
by the Asian Development Bank in its recent Asia-Pacific Climate Report, India is shifting its
focus from an unsustainable dependence on fossil fuel subsidies to fostering clean energy.
Guided by a “remove, target, and shift” strategy, India steadily whittled down its fossil fuel
support, opening doors to new investments in solar power, electric vehicles, and a stronger
energy grid. India’s resolve in reforming fuel subsidies has proven transformative, slashing
subsidies by a striking margin between 2014 and 2018.

This shift was no small feat. It was achieved through careful steps, including the gradual
phasing out of petrol and diesel subsidies from 2010 to 2014, followed by measured tax hikes
on these fuels up to 2017. These moves, though bold, were made to create fiscal breathing room
for renewable projects, allowing the government to channel funds into clean energy initiatives
at an unprecedented 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, setting a strong example for others looking to shift toward a more
resilient energy future.
Asia–Pacific Climate Report
The Asia–Pacific Climate Report is a new
knowledge initiative from the Asian
Development Bank (ADB). It aims to assist
the Asia and Pacific regions in combating
climate change through targeted policy
reforms. The inaugural issue offers a
comprehensive overview of the region's
evolving climate landscape, addressing
critical dimensions of the climate crisis,
including the increasing frequency and
severity of heat waves and the rising economic
and social costs. The report highlights the
urgent need for adaptation measures and
emphasizes the importance of mobilizing
resources to support the region's most
vulnerable populations, ensuring that they are better prepared to face the challenges brought on
by climate change. This report serves as a vital resource for understanding the pressing issues
at hand and guiding effective climate action in the region.

Key Findings of the Report


The Report underscores the effectiveness of India's "remove, target, and shift" approach in
reducing fiscal subsidies in the oil and gas sector by 85%. The findings also reveal how
strategic tax measures, including the cess on coal production, have funded renewable energy
projects and infrastructure improvements. Overall, these insights illustrate India's commitment
to transitioning toward a more sustainable energy future while addressing the challenges of
climate change.

India's Fossil Fuel Subsidy Reform


Since 2010, India has steadily reformed its fossil fuel subsidies, adopting a “remove, target,
and shift” approach. This structured approach involved carefully adjusting retail prices, tax
rates, and subsidies on select petroleum products, which collectively reduced fiscal subsidies
in the oil and gas sector by 85%, from a peak of $25 billion in 2013 to $3.5 billion by 2023.
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. 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.

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

Role of Taxation in Supporting Clean Energy


From 2010 to 2017, the Government of India implemented a cess on coal production and
imports, which was crucial in financing clean energy initiatives. Approximately 30% of the
collections from this cess were allocated to a national clean energy and environment fund,
supporting various clean energy projects and research. 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.
However, the landscape changed with introducing the Goods and Services Tax (GST) in India
after 2017. The cess on coal production and imports was subsumed into the GST compensation
cess, redirecting the flows of these funds to compensate states for revenue losses associated
with the new tax regime. This shift highlights the ongoing challenges and adjustments in India’s
taxation framework as it strives to support clean energy goals while navigating the complexities
of its fiscal landscape.

Major Government Schemes and Programmes


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
programs aim to boost renewable energy production, enhance energy access, and empower
farmers while reducing dependency on fossil fuels. Together, they signify India's commitment
to a cleaner energy landscape.
Conclusion
In conclusion, India’s commitment to transitioning toward a sustainable energy future is
reinforced by the insights presented in the Asia–Pacific Climate Report by the Asian
Development Bank. The report highlights the effectiveness of India's “remove, target, and
shift” approach in reducing fossil fuel dependence and facilitating clean energy investments.
Through key initiatives such as the National Green Hydrogen Mission, PM-KUSUM, 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. Significant
reductions in fossil fuel subsidies and innovative taxation measures supporting clean energy
projects exemplify the nation’s proactive strategy. These sustained efforts in promoting
renewable energy are crucial in addressing climate change challenges, stimulating economic
growth, and creating job opportunities. As India advances on this transformative journey, it sets
a powerful example for other nations, demonstrating that a robust commitment to sustainability
can drive environmental and economic progress, as the Asia–Pacific Climate Report
underscores.

References:
❖ https://www.adb.org/sites/default/files/publication/1008086/asia-pacific-climate-report-
2024.pdf
❖ https://sansad.in/getFile/loksabhaquestions/annex/182/AS31_fzdQcL.pdf?source=pqals
❖ https://pib.gov.in/PressNoteDetails.aspx?NoteId=153279&ModuleId=3&reg=3&lang=1

Santosh Kumar/ Ritu Kataria/ Saurabh Kalia

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