The reform of energy prices in India: impacts on the energy sector and on the economy.

Summary Since India is facing serious problems in the energy sector and since pricing policy can play an important role in improving the situation, the central question of this work is how to redefine a satisfactory energy pricing policy for India and what the consequences of such a policy will be. A comparison of the economic prices of different products with the market prices shows that the existing policy has negative characteristics. However, the incorporation of redistributive objectives in the energy pricing policy in India may lead to the subsidization of some products. Second, we highlight the need to take into account the environmental issue in India. In the light of the previous analysis, four price hypotheses, the reference case and three other variants, are put forward. The analysis of the consequences is carried out at two levels, sectoral and macro-economic. Our analysis shows the following facts: - energy price reform offers the possibility of controlling the demand for commercial energy. however, such a reform risks encouraging a return to traditional energy. - a price reform has some disadvantages in environmental terms, except for the internalization of external costs. - the increase in energy prices may reduce the gdp and the agricultural sector suffers the maximum reduction. the effect is much less important when the tax revenue is recycled. - the effect on the balance of payments appears to be small. Because of the existence of constraints in the implementation of energy price reform, a medium solution would be more acceptable than an extreme solution. It may also require some institutional changes.