Category Archives: Nature Energy

India’s energy subsidy slowdown

The hum of Gurumoorthy Sethuraman’s 10-horsepower (7.46 kW) irrigation pumps joins the murmur of nearby rivers in Arayapuram, India. Sethuraman, an experienced and successful farmer, plants alternating crops of rice and pulses each year in the southeast Indian state of Tamil Nadu. This bounty has enabled his family to send several of his grandchildren to study abroad in the United States and United Kingdom. Yet, by law, he and other commercial agriculture enterprise owners are not required to pay the utility that powers the 60 or so wells that irrigate his 15 hectares of land.

Sethuraman is representative of the fortunate few around the world —the International Monetary Fund reported in 2013 that the top 40% of the population in most developing countries received six times the energy subsidy received by the bottom 40% (http://go.nature.com/w1qdII). In the short run, he and others are direct beneficiaries, but in the long run, misdirected energy subsidies undermine economic development, according to economists at the International Energy Agency (http://go.nature.com/rPzFNR), the World Bank (http://go.nature.com/RJMxmO) and the International Monetary Fund (http://go.nature.com/E2wjfP). Such policies amount to an undeclared regressive tax that undermines investment in infrastructure, health and education for the poorest citizens. Of 40 countries examined during a Council on Foreign Relations workshop last year, for example, the average energy subsidy approached 30% of government revenue and was often greater than health or education spending (http://go.nature.com/pt37o7).

Yet India is in the midst of an energy subsidy reform. It began reducing its own energy subsidies in 2010 and has earned outside recognition for its progress so far (http://go.nature.com/qAbZkw). Its path to an energy policy that supports its poorest people will be long and complex, but it may now be experiencing a remarkable moment of opportunity to widen access to energy.

Read the full feature in Nature Energy: [html] [pdf].