India’s $122 Billion Stimulus for Energy Sector Lacks Clarity in Funding Streams: Report

A huge portion of energy funding is being spent on policies categorized as ‘other energy’


India has committed more public money than any other economy– at least $122 billion – to support the energy sector since the start of the Covid-19 crisis, but the government’s stimulus is a ‘mixed bag’ for the country’s energy transition says a new report.

In a joint report ‘How Green is India’s Stimulus for Economic Recovery?,’ the Institute for Energy Economics and Financial Analysis (IEEFA) and the International Institute for Sustainable Development (IISD) reviewed energy-related policies from the Energy Policy Tracker (EPT), to determine what India can do to promote a greener economy recovery in 2021.

The Energy Policy Tracker (EPT) is a database developed by the IISD and other organizations that use official government sources and other publicly available information to track energy-related Covid-19 recovery policies across major global economies.

India is promoting a greener recovery by committing $35 billion (28.5%) of the $122 billion in energy-related funding to renewables, almost twice the $18 billion (15%) flowing to fossil fuels.

However, the largest proportion of support for energy by far is being spent on policies categorized as ‘other energy’- $69 billion (56.5%) – with little public information available on whether this recovery funding is going to policies that promote sustainable energy, or energy types and sectors with high carbon emissions.

“According to the EPT, India has committed more public money to the energy sector than any other economy globally since January 2020. We estimate that around 22% of the value of these public money commitments are primarily to deal with the impact of Covid-19, and the rest is to meet the government’s ongoing policy objectives on energy security, air pollution, and climate change,” says lead author Vibhuti Garg, IEEFA Energy Economist, Lead India.

As of March 3, 2021, the EPT shows that 31 major economies have pledged over $686 billion to support energy through new or amended policies since January 2020.

Of this overall amount, $274 billion (40%) is committed to fossil fuels, $259 billion (38%) to renewable energy, and $153 billion (22%) to “other energy,” such as nuclear power, first-generation biofuels or policies that support multiple sources of energy. By comparison, more than half (56.5%) of all public money committed to energy in India is supporting ‘other energy.’

India’s policies in ‘other energy’ currently largely support transmission and distribution companies in the power sector. Also, state-level fuel policies, transport policies, development of power projects, and transmission infrastructure are categorized as ‘other energy.’

“We are concerned India’s ‘other energy’ policies may disproportionately benefit fossil fuels, despite the fact they are not targeted at fossil production or consumption exclusively. If a state promotes more incumbent fossil fuels than emerging clean technologies under such programs, it is again likely to benefit the fossil fuel sector more,” says Garg.

The report points out that India’s energy-related commitments in the EPT are only an ‘at least’ value and could be much higher than $122 billion.

There are many measures for which values are not available from official documentation, such as support for commercial mining of coal, pushing back timelines to install pollution control technologies for coal-fired power plants, adding 100 more districts to the City Gas Distribution network, but also the excellent capital support of 25-year power purchase agreements and waiving inter-state transmission charges for renewable energy.

“With more transparent reporting, we would likely see support skewed towards fossil fuels rather than renewable energy. But as of now, the picture in India is incomplete,” says co-author Max Schmidt, a Carlo Schmid Fellow with IISD, who tracks and analyses energy policy developments in India and other countries for the EPT.

As India starts to recover from the COVID-19 pandemic, the report authors make six recommendations for a green recovery in 2021.

“The Government of India is reportedly considering getting to net-zero emissions ten years before China. Such a pledge would require India to raise the bar for a green economic recovery in 2021 and increase its renewable energy commitment,” says co-author Christopher Beaton, Lead, Sustainable Energy Consumption at IISD.

The report recommends six action points that could strengthen economic activity, increase job opportunities, and foster sustainability across the board.

  • Strengthen green industrial policy
  • Invest in large-scale RE grid integration
  • Improve energy access
  • Compliance with environmental norms
  • Improved targeting of subsidies and fossil fuel taxation
  • Unlocking finance

In May 2020, the government announced that power distribution companies (DISCOMs) would receive ₹900 billion (~$12.03 billion) as part of the stimulus package to help the Indian economy recover from the coronavirus crisis.

The Union Budget 2021-22 contained proposals for a massive outlay of ₹3.05 trillion (~$41.92 billion) for revamping the power distribution sector through a reforms-linked program over five years. It also proposed an additional capital of ₹10 billion (~$137 million) in the Solar Energy Corporation of India and ₹15 billion (~$205.6 million) in the Indian Renewable Energy Development Agency.