A booming economy depends critically on energy consumption. Energy is the fuel for economic growth. High energy consumption foreshadows resilience in industrial output, stokes technological developments, and ushers in modern standards of living. Conversely, low energy consumption presents a major developmental challenge as it suppresses living standards, crimps industrial output, and generally perpetuates a hobbled state of human development.

India is widely cited as the fourth largest economy in the world with its GDP valued at approximately $4.06-$4.18 trillion. But this economic powerhouse's record is blighted by the paradox of energy poverty, which is indicated by its abysmal per capita consumption.

India's per capita energy consumption remains stubbornly low at nearly one-third of the global average, reflecting deep-seated economic disparities and structural bottlenecks that hinder human development.

An analysis by the Observer Research Foundation (ORF) indicates that the average Indian's energy consumption hovers close to the average of Southern African countries (excluding South Africa). India's per capita electricity consumption stands at approximately 1,395 to 1,460 kWh, ranking it at 137 out of 218 nations globally. India's usage is about one-fifth of China's and one-ninth of the United States' per capita electricity levels.

While the nation projects an image of a rapidly growing macroeconomic powerhouse with soaring aggregate energy demands, its internal reality is defined by acute energy poverty.

True, India ranks as the third-largest overall energy consumer in the world. However, total energy consumption only shows the aggregate size of an economy. A populous nation like India or China will display massive overall energy consumption. But per capita energy consumption - a yardstick that the policy makers tend to gloss over - reveals how much energy is available to support individual productivity, comfort, healthcare, and education.

This low consumption is not indicative of a lack of need but rather a structural condition known as energy poverty. Energy poverty manifests in two distinct dimensions: physical access and financial affordability. In rural and peri-urban India, hundreds of millions of households remain locked out of high-tier energy usage. While the government has achieved near-universal electrification on paper, the quality, reliability, and duration of power supply remain highly erratic.

The country's energy planners and indeed successive regimes in power have done nothing to crank up per capita energy consumption even though a number of reports have highlighted the deplorable situation. There has never been a national debate on this critical issue in parliament - which means that the people in power simply want to brush this disturbing statistic under the carpet.

If anything, the policy makers have deliberately worked in a manner designed to scuttle any possibility of improving per capita energy consumption in the country. A critical driver of this stagnation is the government's fiscal policy, which levies exorbitant taxes on petroleum products and fuel.

Rather than treating affordable energy as a foundational utility and an engine for socio-economic mobility, India's fiscal framework treats fuel as an inelastic revenue-generating cash cow. This regressive taxation paradigm artificially inflates structural costs, stifles the quality of life for hundreds of millions, and acts as a severe drag on industrial and domestic productivity.

Revenue generation was a policy imperative between the 1960s and the 1980s. But the situation is no longer as acute as it was back then and there is no real reason to persist with a revenue-optimising tax structure when the country is flush with foreign exchange.

Industry analyses place India close to the global peak in terms of the tax burden built into the retail fuel costs in percentage terms. The share of taxes levied on auto fuels is approximately 69% of the retail pump price for petrol and diesel.

The Union Government imposes a central excise duty and additional cesses (such as road and infrastructure cesses) on auto fuels. State governments charge local Value Added Tax (VAT) or sales tax, which varies significantly across different states and union territories.

Petroleum products such as petrol, diesel, aviation turbine fuel, natural gas, and crude oil remain outside the preview of the Goods and Services Tax (GST) framework and continue to be taxed via traditional excise and VAT mechanisms.

The government's rationale for maintaining this high-tax regime is twofold, though both arguments conflict with broader developmental goals. First, fuel taxes serve as an easy, immediate source of revenue to bridge chronic fiscal deficits. Since the demand for fuel is highly inelastic-people must travel to work, and goods must be transported regardless of cost-taxing petroleum ensures a steady, predictable flow of cash into public coffers. Second, policymakers occasionally mask this fiscal dependency as an "implicit carbon tax," arguing that high prices disincentivize fossil fuel consumption and accelerate the transition toward renewable alternatives.

However, this justification ignores the economic realities of a developing nation. In an economy where clean, scalable alternatives like electric vehicles and robust public transit networks are still in their infancy, high fuel taxes do not drive a green transition; instead, they penalize unavoidable consumption and trap lower-income citizens in financial strain.

Of late, there have been initiatives like Solar and Wind Scaling to nudge consumers towards renewable energy. The authorities have accelerated massive solar photovoltaic and wind installations through aggressive bidding trajectories and schemes like the PM-Surya Ghar rooftop initiative to boost decentralized clean generation. These initiatives can only have a marginal impact.

The government should hunker down and kickstart a process to bring about a basic change in the tax structure on energy sources. Lowering taxes on petroleum products will serve as a direct catalyst to boost per capita energy consumption by reducing end-user costs and boosting demand.

In economics, energy consumption exhibits significant price elasticity. In developing economies, energy demand is highly elastic. A small drop in price often leads to a disproportionately large surge in consumption. In highly developed economies, demand is more inelastic as consumption patterns are already saturated.

When governments reduce fuel taxes, the retail price drops, making energy more affordable for households and industries. Lower pump prices immediately free up disposable income, allowing consumers to drive more, travel further, and utilize personal vehicles frequently.

Petroleum is a primary input for manufacturing, logistics, and agriculture. Cheaper fuel lowers operational costs, prompting industries to scale up production and consume more energy. The cost of moving goods drops, leading to increased freight activity, more frequent supply chain runs, and higher commercial fuel burning.

To rescue its population from energy poverty and sustain its long-term economic aspirations, India must radically pivot its energy fiscal strategy. The current paradigm, which views energy as a luxury or a taxable exploit, must be replaced with a framework that treats energy as a core developmental catalyst.

The first and most urgent step is the rationalization of tariffs by bringing petroleum products under the unified GST framework. Integrating fuel into the GST, even at the highest existing slab of 28%, would immediately dismantle the cascading effect of overlapping central and state levies, leading to a substantial drop in retail fuel prices. This move would instantly lower logistical bottlenecks, cool inflationary pressures, and free up billions in disposable income for households and micro-enterprises.

Secondly, the state must transition from a model of revenue absorption to one of direct reinvestment. If fuel taxes are to be levied at all, the generated capital must be strictly ring-fenced and funnelled back into building modern energy infrastructure. This includes scaling up localized, decentralized solar grids in rural areas, subsidizing public electric transport infrastructure in metropolitan centres, and upgrading the aging distribution companies (DISCOMs) that currently bottleneck electricity delivery.

India cannot achieve its goal of becoming a truly developed nation while its citizens remain trapped in a state of energy under consumption. A low per capita energy footprint is a symptom of an economy constrained by high structural costs and restricted public accessibility.

By dismantling the regressive, high-tax framework on fuel and prioritizing affordable, high-quality energy deployment, the government can transform energy from a fiscal cushion into an unbridled economic accelerator. Only then can India unlock its true productive potential and improve the standard of living for its massive population.