Energy subsidies prove drain on Indian economy

Energy subsidies need to be addressed as a priority issue in India, according to the World Energy Council.

Fuel subsidies have proved a major cost to India and have resulted in the country creating an unsustainable fiscal deficit over the years because of its heavy dependent on oil imports. India’s fuel subsidies reached an estimated 1.4 trillion rupees (Dh83 billion) in the financial year to March 2014, according to Moody’s.

But India has been gradually reducing its expenditure on subsidies for consumers. Narendra Modi’s government in October ended government-controlled diesel subsidies in an effort to cut spending. This followed the previous government’s reduction of diesel subsidies. Petrol was deregulated in India two years ago. Subsidies on kerosene and propane are still in place.

“Energy subsidies, perceived to be a critical uncertainty in 2014, now have moved towards the need-for-action quadrant of the map,” the World Energy Council highlighted in a recent report. “The drop in uncertainty could be explained through the decision of the Modi government to continue with the diesel subsidy reforms initiated through the previous government. The cost of energy subsidies in India is planned to decrease to less than 0.5 per cent of Indian GDP by 2016. Hence there is a need for action to ensure that planned changes are being implemented accordingly.”

It says that India is one of the biggest energy consumers in the world, after China, the United States and Russia. India’s energy demand is rising an annual growth rate of 2.8 per cent, according to the organisation.

Reducing subsidies is considered politically sensitive because such moves are often unpopular with the masses, who are also voters.

But because oil prices have come down sharply anyway, consumers have not noticed a negative impact from the removal of the government subsidies on diesel yet, which has actually come down in price compared to before the price controls were removed.

Savings from fuel subsidies can be used in other ways, such as helping the poor in a more targeted manner and infrastructure spending, experts have noted.

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The specs

Engine: 2.0-litre 4-cyl turbo

Power: 201hp at 5,200rpm

Torque: 320Nm at 1,750-4,000rpm

Transmission: 6-speed auto

Fuel consumption: 8.7L/100km

Price: Dh133,900

On sale: now

Diriyah project at a glance

- Diriyah’s 1.9km King Salman Boulevard, a Parisian Champs-Elysees-inspired avenue, is scheduled for completion in 2028
- The Royal Diriyah Opera House is expected to be completed in four years
- Diriyah’s first of 42 hotels, the Bab Samhan hotel, will open in the first quarter of 2024
- On completion in 2030, the Diriyah project is forecast to accommodate more than 100,000 people
- The $63.2 billion Diriyah project will contribute $7.2 billion to the kingdom’s GDP
- It will create more than 178,000 jobs and aims to attract more than 50 million visits a year
- About 2,000 people work for the Diriyah Company, with more than 86 per cent being Saudi citizens


Manchester United 1 (Fernandes pen 2') Tottenham Hotspur 6 (Ndombele 4', Son 7' & 37' Kane (30' & pen 79, Aurier 51')

Man of the match Son Heung-min (Tottenham)

The specs: 2017 Ford F-150 Raptor

Price, base / as tested Dh220,000 / Dh320,000

Engine 3.5L V6

Transmission 10-speed automatic

Power 421hp @ 6,000rpm

Torque 678Nm @ 3,750rpm

Fuel economy, combined 14.1L / 100km


Co-founders of the company: Vilhelm Hedberg and Ravi Bhusari

Launch year: In 2016 ekar launched and signed an agreement with Etihad Airways in Abu Dhabi. In January 2017 ekar launched in Dubai in a partnership with the RTA.

Number of employees: Over 50

Financing stage: Series B currently being finalised

Investors: Series A - Audacia Capital 

Sector of operation: Transport