Indian Council for Research on International Economic Relations

Completed Details

Assessment and Implications of Rationalizing Fossil-Fuel Subsidies in India

Project Leader: Amrita Goldar
Research Team: 

 Swati Saluja

Commencement: April 2013
Completion: November 2013
Funded by: IISD (International Institute for Sustainable Development)

The study aims to model the impacts of energy subsidy reforms in India. The impact analysis modelling for fossil-fuel based consumer and producer subsidy reforms in India would be done using the Social Accounting Matrix (SAM) framework. As a first step, a modified SAM with detailed information on petroleum products and electricity sectors would be constructed. This SAM would then be used for analysing a change in subsidy regime on the directly linked sectors and the entire economy using tools such as the multiplier and structural path analysis. 

Literature shows that fossil fuel subsidy reforms would lead to increases in prices paid for petroleum products and electricity by one or more consumer groups. By maintaining a focus on distributive impact of reforms on households throughout the analysis, the modified SAM analysis would try to look at the resulting reduction in fuel demand and switching between fuels in different household categories. The impact of increased prices of fossil fuels to electricity generators and the resultant increase in electricity tariffs would also be modelled..

Research

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