The COVID-19 Crisis Presents an Opportunity for India to Opt for Clean Energy

The corona virus pandemic has brought great devastation for many across the globe. Not one country has remained unaffected. But the silver lining in the middle of this crisis is that the lockdown in India has forced us to opt for sustainable changes for the environment. While India should prioritise health and economic recovery in the aftermath of the Covid-19 crisis, there will also be an opportunity for clean energy transition as part of coping strategies and support measures

Though it is yet uncertain how long the pandemic will last an increased focus on economic recovery once Covid-19 is under control can be expected, which includes addressing concerns of the energy sector. The period post Covid-19 will give the Indian government a chance to reset its energy policies and increase focus on clean energy. If India considers economic stimulus to support energy producers it should carefully assess how different interventions for producers will undermine or support the clean energy transition.

The report “Mapping India’s Energy Subsidy 2020: Fossil fuels, renewables, electric vehicles” (pdf) has been put together by two think tanks working on environmental issues—the International Institute for Sustainable Development (IISD) and the Council on Energy, Environment and Water (CEEW).

It highlighted that though the overall support for fossil fuels has been decreasing, there is still a significant gap between usage of fossil fuels and renewable energy, with the latter left to cover a lot more ground to match up to fossil fuel usage. It also revealed that subsidies for fossil fuels are still over seven times more than subsidies for alternative energy in India. “In financial year 2019, subsidies for oil, gas and coal amounted to Rs83,134 crore ($12.4 billion), compared to Rs11,604 crore for renewables and electric mobility,” said the report.

While talking about how India’s energy subsidies might change in response to the Covid-19 crisis, the report said: “it is hard to predict the full impacts of Covid-19, but it seems likely they will be significant and prolonged,” and that “clean energy transition can and should be reflected in coping strategies and support measures.”

The report stressed that there are three key implications for public resources and energy transition in India, in the post-pandemic recovery phase—a crash in world oil prices can free up revenue to help tackle the crisis by temporarily eliminating petroleum product subsidies and enabling higher tax rates, increasing demand to support energy producers, as profits fall, demand falters and perceptions of risk rise as well as increasing demand for social protection and effective and efficient public services.

“Investments in these areas can create new options to target energy access subsidies, allowing benefits to be clustered on those most in need,” said the report.

“India’s major energy subsidies amount to Rs1.74 lakh crore—higher than the initial economic package of Rs1.70 lakh crore that the government announced for tackling Covid-19.  The centre needs to reassess this large subsidy outlay and rationalise it across end-consumers,” Karthik Ganesan, a research fellow at the CEEW and one of the authors of the report, told Mongabay-India.

The IISD and CEEW report examined how the Indian government has used subsidies to support different types of energy and how India’s energy subsidy policies have changed. It focused on the major developments in India’s dynamic energy policy environment over the years, public support to the country’s desired energy future, subsidies from production to consumption for coal, oil and gas, electricity transmission and distribution, renewable energy and electric vehicles.