As power shortages and blackouts due to poor monsoon rains and increased demand spread across India, the issue of using expensive, subsidized diesel to fuel generators for backup power is becoming important. In one state, diesel consumption jumped by 14 percent in the weeks after the blackouts started.
The issue is complicated by the policy of keeping diesel cheap to support agriculture and transportation. The government, however, currently is considering removing the subsidies within the next two years. India has a pair of large refineries, one of which is just starting up, that were built to export their products rather than consume them domestically. These refineries receive export subsidies that make them profitable. New Delhi is considering reworking its tax and subsidy policies so that more diesel will remain in the country and reduce its dependence on imports.