New Delhi, Dec 16:
Government support for fossil fuels in India declined to five times the level of clean energy subsidies in the financial year 2024, marking the narrowest gap between the two in the past five years, according to a new report released on Tuesday. The trend has been driven largely by a sharp rise in clean energy subsidies alongside a notable fall in fossil fuel support.
According to Mapping India’s Energy Policy 2025, published by the International Institute for Sustainable Development (IISD), clean energy subsidies rose by 31 per cent year-on-year to nearly ₹32,000 crore (USD 3.9 billion) in FY 2024. The increase reflects sustained policy backing for renewable energy and low-carbon technologies.
In contrast, fossil fuel subsidies declined by 12 per cent during the same period — the steepest drop since the COVID-19 pandemic. However, the report noted that this reduction was largely due to temporary global price dynamics rather than long-term structural policy reforms.
Together, these developments have contributed to India crossing a key climate milestone, with non-fossil fuel electricity capacity exceeding 50 per cent in 2025 — five years ahead of schedule under the country’s updated Nationally Determined Contribution (NDC 2.0).
Despite this progress, the report cautioned that sustaining the energy transition will require stronger diversification by energy-related public sector undertakings (PSUs). While public financial institutions such as the Rural Electrification Corporation and Power Finance Corporation have expanded lending to renewable energy and power distribution reforms, PSUs remain heavily invested in fossil fuels.
In FY 2024, around 83 per cent of capital expenditure by central energy PSUs was directed towards coal mining, refinery expansion, and oil and gas development. Limited diversification among state-owned enterprises raises concerns about locking in fossil fuel infrastructure that may be misaligned with India’s long-term climate goals.
IISD senior policy advisor Swasti Raizada said India’s budget signals a gradual shift toward clean energy, but deeper reforms are needed to redirect public capital. The report also highlighted that electricity subsidies reached a record ₹2.1 lakh crore in FY 2024, rising 18 per cent despite electricity demand increasing by only seven per cent, adding pressure on state finances and underscoring the need for power sector reforms.
