India’s energy transition is often discussed through the lens of solar parks, electric vehicles and ambitious net-zero targets. But a closer look at the country’s subsidy structure tells a more layered story, one where traditional energy sources still dominate public spending, even as cleaner technologies slowly gain ground.
Data from the International Institute for Sustainable Development (IISD) shows that India’s total energy subsidies rose sharply from around ₹3.13 lakh crore in FY2020 to nearly ₹4.38 lakh crore in FY2025. At first glance, this increase reflects the growing cost of powering one of the world’s fastest-growing economies. But beneath the headline numbers lies a significant shift in priorities — and some uncomfortable contradictions.
The largest share of subsidies continues to go towards transmission and distribution, which crossed ₹2.59 lakh crore in FY2025. This is hardly surprising. India’s power sector still struggles with distribution losses, financially stressed DISCOMs and uneven infrastructure. Subsidies here are often necessary to keep electricity affordable, especially for households and agriculture. But they also reveal a deeper structural problem: India is spending enormous sums to sustain inefficiencies instead of fixing them permanently.
Coal, despite repeated conversations around decarbonisation, remains deeply embedded in the system. Subsidies for coal stood at over ₹45,000 crore in FY2025. Although lower than the FY2023 peak, the number highlights a reality policymakers cannot ignore — coal continues to be the backbone of India’s energy security. In times of record peak power demand and rising temperatures, thermal power plants still carry the burden of keeping the grid stable.
At the same time, the most interesting trend is visible in clean energy subsidies. Renewable energy support has grown steadily, rising from around ₹10,000 crore in FY2020 to over ₹26,000 crore in FY2025. Electric vehicle subsidies have seen an even sharper rise, touching nearly ₹17,000 crore. Biomass and biofuel support has also expanded significantly.
These numbers signal that India is no longer treating clean energy as a side conversation. It is becoming part of mainstream economic planning. Government initiatives such as the Production Linked Incentive (PLI) scheme for solar manufacturing, FAME incentives for EVs and support for green hydrogen are beginning to reshape spending priorities.
Yet the imbalance remains striking. Fossil-fuel-linked subsidies and system-support costs still far outweigh direct clean-energy support. This reflects the difficult position India occupies. Unlike developed economies, India cannot abruptly move away from conventional fuels without risking energy access, industrial growth and affordability.
The challenge, therefore, is not whether subsidies should exist, but where they should gradually shift. Public money spent on energy must increasingly move toward storage, grid modernisation, battery manufacturing and renewable integration rather than simply supporting consumption or covering systemic inefficiencies.
India’s energy transition will not be judged only by the number of solar panels installed or EVs sold. It will also be measured by how intelligently the country redirects financial support from old systems toward future-ready infrastructure.
