India spent at least ₹4.3 lakh crore ($51 billion) on energy subsidies in 2024-25, with nearly three-fourths going towards electricity and LPG consumption subsidies, even as support for fossil fuels remains around three times higher than that for clean energy, according to a new analysis by the International Institute for Sustainable Development (IISD).
The report, Mapping India’s Energy Policy 2026: Power Subsidies and Supply Shocks Tightening Clean Energy Support, says rising broad-based fossil fuel subsidies are shrinking the fiscal space available for scaling clean energy, which is crucial for reducing India’s dependence on volatile fuel imports.
Of the total subsidy bill, electricity and LPG consumption subsidies accounted for 75 per cent. Electricity subsidies stood at ₹2.41 lakh crore, or 58 per cent of total energy subsidies, while LPG subsidies reached ₹71,718 crore in FY25.
The report notes that electricity subsidies have nearly doubled over the past decade and are growing faster than consumption itself, partly due to higher eligibility limits for subsidised consumers in some states. In several states, these subsidies are equivalent to nearly 20 per cent of annual revenues, with a rising share being used to cover routine operating costs of power distribution companies rather than efficiency improvements.
Fiscal vulnerability
LPG remains the single largest fossil fuel subsidy and a major source of fiscal vulnerability, IISD said. India imports around 60 per cent of its LPG requirements, making subsidy spending highly sensitive to global prices. Nearly half of the FY25 LPG subsidy burden came from under-recoveries — losses borne by oil marketing companies when retail prices are kept below cost.
“The recent tensions in the Gulf highlight India’s exposure to global LPG price volatility,” said Sunil Mani, policy advisor at IISD. He warned that if prices remain elevated, LPG under-recoveries could exceed ₹60,000 crore in FY27.
By contrast, subsidies for renewable energy stood at ₹26,406 crore and support for electric vehicles at ₹16,812 crore in FY25. Together, clean energy subsidies accounted for only about 10 per cent of total support.
The report called for better targeting of electricity and LPG subsidies and stronger support for alternatives such as rooftop solar, electric cooking, decentralised biogas and EVs.
Published on April 29, 2026