Subsidy Reforms

Monday I asked whether LIHTC is doing what we want. The honest answer: not always, and definitely not for the families at 30% AMI who need the housing the most. So what reform could actually look like — beyond "burn it down and start over." 1. Voucher-first (McClure / Olsen / CBO 1992). Divert LIHTC dollars into housing vouchers. CBO estimated this would help 2x as many households per dollar. Vouchers go where households need to live, not where developers find it profitable to build. The catch: vouchers depend on landlord acceptance. In tight markets, voucher holders get rejected. Source-of-income discrimination laws help but aren't universal. They don't add to supply — they help families pay for existing units. And the existing voucher program is already chronically underfunded — only ~1 in 4 eligible households receives a voucher. National waitlists are massive; many are closed. Diverting LIHTC dollars would expand the program but not enough to meet actual demand. 2. Two-tier LIHTC. Keep the existing 60% AMI credit for workforce housing. Add a deeper-subsidy tier explicitly for 30% AMI units with additional federal grant on top to close the construction-cost gap. This addresses the income-targeting critique without crashing the existing pipeline. Caveat: per yesterday's math, the 30% AMI tier would still likely need an ongoing operations subsidy. Construction subsidy alone doesn't get you there. 3. LIHTC + mandatory operating subsidy layering. Layer project-based Section 8 or HUD operating subsidy on top of LIHTC. Lets rents go to 30% AMI without breaking the construction math. The best LIHTC projects already do this informally — formalizing it would scale the model. The catch: this could break the federal budget fast. Universal operating subsidy at federal scale is a much bigger spending commitment than LIHTC currently is, especially given how many voucher-eligible households go unserved today. 4. Geographic targeting. Restrict new LIHTC allocations in markets with documented rent convergence. Redirect to rural counties, declining neighborhoods, post-disaster zones — places where the private market won't build. The catch: you often can't build there. AMI is too low. If AMI is $55K, max LIHTC rents at 30/50/60% AMI all drop proportionally — but construction costs don't. The math gets harder, not easier. Plus political pressure: state HFAs control allocation and don't want federal restriction. 5. Sunset and replace. The McClure original-intent option. Phase LIHTC out over 10 years. Replace with federal funding directly to housing authorities for production + universal voucher entitlement. The risk: the transition period would collapse affordable production before alternatives ramp. The LIHTC industry infrastructure can't be rebuilt in a year. Friday I close the week with the counter-perspective — what LIHTC does that no other tool does. What would you do if you were king for the day?

📚 Lessons from Energy Subsidy Reforms: Successes and Failures A discussion paper from KAPSARC, authored by Anwar Gasim, Paolo Agnolucci, and Paul Beelds, analyzes the factors contributing to the success and failure of energy subsidy reforms worldwide. The study draws on a comprehensive review of existing literature and a database of over 400 reform attempts across 44 countries from 1995 to 2022. Key Takeaways: 1️⃣ Successful reforms are often implemented gradually, aligning with socioeconomic conditions and stakeholder engagement. Rushing the reform process often leads to social unrest and policy reversals. 2️⃣ Implementing comprehensive strategies, including clear communication, compensatory measures, and complementary policies, helps mitigate negative impacts and builds public support for reforms. 3️⃣ Consulting with stakeholders, especially vulnerable groups, ensures that their concerns are addressed and increases the likelihood of reform acceptance. 4️⃣ A gradual shift towards market-based pricing, potentially through automatic price adjustments tied to global benchmarks, can reduce the fiscal burden of subsidies and improve price signals. 5️⃣ There's no single blueprint for successful subsidy reform. The specific design and implementation of reforms must be tailored to each country's unique context, considering its political economy, energy mix, and social dynamics. Factors Influencing Outcomes: ✴️ The study identifies several critical factors that influence the success of energy subsidy reforms: ✴️ Preparation: A well-defined reform strategy and clear communication with the public are essential. ✴️ Timing: Choosing the right moment to implement reforms, considering economic and political conditions, is crucial. ✴️ Stakeholder Engagement: Consulting and building consensus with stakeholders can help mitigate resistance. ✴️ mplementation: Gradual implementation and compensatory measures can reduce negative social impacts. ✴️ Complementary Policies: Implementing complementary policies, such as investments in energy efficiency and renewable energy, can enhance the effectiveness of subsidy reforms. The KAPSARC database reveals several key lessons beyond those found in existing studies: ✅ Energy subsidy reforms are more likely to be successful on the first attempt, highlighting the importance of careful planning and preparation. ✅ Unsuccessful reforms frequently lead to social unrest and protests, emphasizing the need to address social equity concerns. ✅ Strong political will is essential to overcome resistance from vested interests and implement reforms effectively. #EnergySubsidyReform #KAPSARC #EnergyPolicy #Sustainability #EnergyTransition #FossilFuels #RenewableEnergy #PolicyRecommendations #Decarbonization

#ClimateonaPlate 7/30 𝐓𝐡𝐞 𝐛𝐮𝐬𝐢𝐧𝐞𝐬𝐬 𝐨𝐟 𝐬𝐮𝐬𝐭𝐚𝐢𝐧𝐚𝐛𝐢𝐥𝐢𝐭𝐲 𝐡𝐚𝐬 𝐭𝐨 𝐛𝐞 𝐬𝐮𝐬𝐭𝐚𝐢𝐧𝐚𝐛𝐥𝐞 𝐟𝐨𝐫 𝐢𝐭 𝐭𝐨 𝐛𝐞 𝐚𝐝𝐨𝐩𝐭𝐞𝐝 𝐚𝐭 𝐬𝐜𝐚𝐥𝐞. Let me illustrate that with an example: Most of us understand solar pumps as a farmer subsidy or at best India's transition to green energy. ☀️💦 But when we look closer we see something far more interesting: It's actually about math,and a business model where unit economics makes sense. In reality: It's a financial reform that manifests as a climate forward incentive. For decades, DISCOMs ( electricity distribution companies) have been carrying a quiet burden: - Buying power at ₹6–₹7/unit and supplying it to farmers at ₹0–₹1.5/unit( lets remember 1/5 of the electricity demand in India comes from the agricultural sector). This created annual losses running into thousands of crores. - Extending infrastructure to remote locations in ways that are capex intensive, high on maintenance and prone to breakdowns due to transformer overloads. This system is fragile and expensive, creating structural financial imbalances for Distribution companies. Solar pumps flip this fragile economics. And here's how: ⬇️ - A one time capex replaces 15-20 years of subsidy losses. - Asset payback happens in 3-5 years after which solar pumps are pure financial savings. - Reducing Agricultural load improves voltage levels, brings frequency stability and dramatically reduces transformer failures. - Every unit saved becomes a high-value industrial unit helping bring down cross-subsidy, lowering industrial tariffs, and make the state more competitive. And the result is : 𝐓𝐡𝐞 𝐬𝐚𝐦𝐞 𝐫𝐞𝐟𝐨𝐫𝐦 𝐭𝐡𝐚𝐭 𝐬𝐚𝐯𝐞𝐬 𝐃𝐈𝐒𝐂𝐎𝐌𝐬 𝐠𝐢𝐯𝐞𝐬 𝐟𝐚𝐫𝐦𝐞𝐫𝐬 𝐜𝐥𝐞𝐚𝐧𝐞𝐫, 𝐜𝐡𝐞𝐚𝐩𝐞𝐫, 𝐦𝐨𝐫𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞 𝐢𝐫𝐫𝐢𝐠𝐚𝐭𝐢𝐨𝐧. They get: • Zero fuel expense. • Predictable daytime irrigation ( don't need to plan their irrigation as per electricity availability) • Healthier soil and better crop planning. • Savings of ₹20,000–₹45,000 a year on fluctuating diesel costs. • The ability to grow higher-value crops with confidence. It’s cheaper, cleaner and more reliable.And it puts control back in the farmer’s hands. When a single intervention makes DISCOMs financially stronger and farmers economically stronger it’s not really a subsidy but sustainability in its best form. By installing 45,911 off-grid solar pumps in 30 days ( a milestone that's now submitted for a Guinness World Record) Maharashtra is leading the country as the No.1 state in deployment under the #PMKUSUM and #MTSKPY schemes Solar pumps aren’t a welfare scheme.They’re a structural reform — one of the biggest we’ve seen in India’s power sector in years. The #GreenEconomy is scalable,possible and sustainable when done right . CM Devendra Fadnavis, MSEDCL , lokesh chandra, IAS Abha Shukla, Gopal Kabra Umesh Balani Abhijeet Gan Dinesh Patidar

It occurred to me… If this shutdown debate is really about preserving the EXPANDED subsidies — not the original ones that existed pre-COVID — it’s worth asking: How were people affording these ACA Exchange plans back in 2019 or 2020, before COVID and the Inflation Reduction Act (IRA)? Back then, premiums were high — no question. But what’s happened since then isn’t just inflation. It’s a full-blown price surge that’s been quietly absorbed by the federal government. https://lnkd.in/e-JMEQj6 Take a 40-year-old buying a silver plan on the ACA exchange: In 2019, the plan might have cost around $430 per month. With their subsidy, they might have paid about $200 out of pocket, and the government covered the rest. In 2025, that same plan now costs roughly $700 per month and thanks to the expanded subsidies, the individual is still paying around $200 — but now the government is picking up more than double what it did before. The consumer’s wallet didn’t get relief — the insurer’s revenue did. In 2019, a middle-income family of four earning about $120,000 a year didn’t qualify for subsidies. Their silver plan cost around $1,250 a month, with a $5,000 deductible. Expensive, yes... but see what happens.... By 2025, that same plan costs roughly $2,200 a month with an $8,000 deductible. Under the expanded subsidy rules, that family now qualifies for help — bringing their premium back down to about $1,250 a month. But nothing about healthcare got cheaper. The government is simply covering the extra $1,000 a month — money that goes straight to insurers. So when we talk about “protecting subsidies,” let’s be more precise and honest about what we’re protecting. The expanded subsidies aren’t keeping premiums low — they’re masking how high they’ve actually gone. The system didn’t get more affordable. It just got more expensive — and we found a new payer. And while I do not believe we should punish families for the industry pouring gas onto the fire of growing premiums, I do think we have a responsibility to have an honest conversation about what is really happening in the market.

Geeky ag post incoming... Jamie Collinson shared some fascinating research from CIMMYT with wide-reaching implications(and affirmations) for regen agric, fertiliser subsidy reform, carbon payment inclusiveness and more specifically soil health boosting efforts in Zambia, a country close to my heart, but also well known for heavily over-investing in fertilizer subisides; key findings: Framing Matters: Shifting the policy label from "fertilizer subsidy" to "soil health payment" significantly increased farmers' valuation of soil health improvement, even when the monetary value of the support remained identical. Willingness to Trade Yield: On average, farmers are willing to forgo a significant amount of immediate maize yield—ranging from 28 to 37 bags/ha—in exchange for long-term soil health improvements. But, Labour is a Barrier and Hidden Cost: Sustainable practices are often more labour-demanding; farmers required roughly 3.4 bags/ha of additional yield for every 10 extra person-days of work required, highlighting a major barrier to adopting regenerative techniques. And, Significant Gender Gaps: The "soil health payment" framing increased valuation for soil health by 118% for men and 30% for women, largely because men were previously indifferent to soil health under traditional fertilizer-focused subsidies. Yield Risk Could Be a Dealbreaker: Farmers view yield risk (from drought or pests) as a massive deterrent; women in the study required a compensatory yield of 36 to 43 bags/ha just to offset the perceived risk of more sustainable practices. Interest in Diversification: There is a strong, quantified interest in legumes; farmers are willing to trade approximately 3.5 to 4 bags of maize yield for better legume production outcomes. Implication: To successfully reform subsidies, governments should shift from rigid input-delivery systems to flexible "soil health" incentives that allow farmers to invest in locally relevant practices while providing a safety net for the risks and labour involved in transitioning (FYI Chanda Banda, Luke Viljoen, Claire Brosnihan)

Agricultural subsidies can feed progress – or problems. Each year, countries spend around $630 billion supporting food and agriculture. Nearly 70% of those subsidies are tied to production or inputs like fertilizer, feed, and fuel. The result: staples, dairy, and meat receive the bulk of support, while fruits, vegetables, and pulses, which are essential for healthy diets, are often under-supported or even penalized. These subsidies distort markets, encourage monocultures, exacerbate environmental degradation, and do little to improve nutrition. The challenge isn’t to spend more. It’s to spend smarter. Evidence shows that repurposing these subsidies could: - Lower the cost of healthy diets, especially if financial support is directed to consumers, rather than producers. - Promote diversification toward more nutritious foods and foods with smaller environmental footprints. - Reduce poverty and inequality, when paired with social protection and inclusive financing. Governments also need complementary action, including providing safety nets to protect vulnerable people from shocks and climate and energy policies to cut greenhouse gas emissions. They also need to manage political pressures and competing interests to move forward with reforms. It takes a whole-of-government effort. But it’s possible to align every dollar of agricultural support to advance the goals of nutrition, equity, and sustainability. SOFI 2022 “Repurposing Food and Agricultural Policies to Make Healthy Diets More Affordable” https://lnkd.in/ep9a9EDQ (Photo: Bernd Dittrich on Unsplash)

𝗕𝗼𝗮𝗿𝗱𝗿𝗼𝗼𝗺 𝗦𝗶𝗴𝗻𝗮𝗹 𝗹 𝘈𝘚𝘌𝘈𝘕'𝘴 𝘌𝘳𝘢 𝘰𝘧 𝘊𝘩𝘦𝘢𝘱 𝘌𝘯𝘦𝘳𝘨𝘺 𝘐𝘴 𝘌𝘯𝘥𝘪𝘯𝘨 Indonesia's fuel price adjustment is not an isolated event. It is part of a broader regional repricing of energy risks across Southeast Asia. For much of the past two decades, Southeast Asia enjoyed a largely underappreciated competitive advantage: 𝘢𝘧𝘧𝘰𝘳𝘥𝘢𝘣𝘭𝘦 𝘦𝘯𝘦𝘳𝘨𝘺. Cheap fuel helped suppress inflation, support household consumption, sustain manufacturing competitiveness, and provide governments with a powerful political buffer during periods of economic stress. Indonesia's decision to raise Pertamax prices by more than 30% this week is more than a domestic pricing adjustment. It is a signal that policymakers across ASEAN are confronting the same uncomfortable reality: the cost of shielding economies from global energy shocks is becoming increasingly difficult to sustain. Escalating geopolitical tensions and disruptions to global oil markets have pushed crude prices well above assumptions embedded in many ASEAN fiscal frameworks. In Indonesia, energy subsidy costs surged 𝟮𝟬𝟴% 𝘆𝗲𝗮𝗿-𝗼𝗻-𝘆𝗲𝗮𝗿 in May, while the government had already allocated more than 𝗜𝗗𝗥 𝟯𝟴𝟭 𝗧 for energy-related support in the 2026 budget. The latest fuel adjustment came alongside an unexpected interest rate increase by Bank Indonesia. The common denominator is unmistakable: fiscal resources are increasingly being used to absorb energy volatility. This matters because energy affordability has long functioned as an invisible subsidy for regional growth. Over time, energy inflation becomes economy-wide inflation. 𝗧𝗵𝗲 𝗜𝗺𝗽𝗹𝗶𝗰𝗮𝘁𝗶𝗼𝗻𝘀 1️⃣ Energy security is rapidly becoming a competitiveness issue. Countries with stronger fiscal positions, domestic energy resources, diversified supply chains, and more resilient power systems will be better positioned to navigate prolonged volatility. 2️⃣ Subsidy reform is likely to become a recurring policy theme across the region. Governments increasingly face a difficult trade-off between preserving purchasing power and maintaining fiscal credibility. 3️⃣ Capital allocation patterns may shift. Energy infrastructure, grid modernization, natural gas, storage capacity, and renewable energy investments are moving from environmental priorities to strategic economic necessities. The broader question is whether Southeast Asia can preserve its growth model in a world where energy can no longer be assumed to be abundant, cheap, and politically manageable. Indonesia's fuel adjustment may ultimately be remembered not as a pricing event, but as one of the earliest signs that ASEAN is entering a new era one defined less by cheap energy and more by the cost of energy security. In that environment, policy credibility, fiscal resilience, and energy diversification may become the region's most valuable competitive advantages. #ASEANEconomy #EnergyTransition #MacroStrategy #BoardroomSignal

Pakistan is about to make a policy mistake — quietly. Instead of fixing the grid, we’re fixing the consumer. According to a recent Dawn report, prosumers have strongly pushed back against NEPRA’s proposed move to curb solar net-metering incentives. The draft regulations (depicted in infographic below) would sharply reduce export credits, shorten settlement periods, and fundamentally alter the economics for rooftop solar — especially for households and SMEs that invested their own capital in response to high tariffs and unreliable supply. Let’s be clear: rooftop solar didn’t take off because of generosity. It grew because grid electricity became unaffordable, inefficient, and unpredictable. Consumers responded rationally. They reduced load, cut losses for the system, and invested where the state could not. Now, instead of addressing structural failures — transmission losses, poor governance, cross-subsidies, and delayed reform — policy is shifting toward penalising those who adapted. Yes, the power sector has real challenges: cost recovery, grid stability, equity. But retroactive uncertainty and blunt incentive cuts are not reform. They weaken trust, slow clean-energy adoption, and send a chilling signal to private investors at a time Pakistan desperately needs private capital. The likely outcome is not grid stability, but: slower renewable uptake higher regulatory risk premiums continued dependence on an inefficient power sector. Reform requires fixing systems, not scapegoating users. Fix the grid. Fix governance. Fix incentives. Don’t punish those who escaped a broken system. NEPRA - National Electric Power Regulatory Authority https://lnkd.in/diHh-Tuk

Budget 2026: Indian Agriculture from Protection to Performance!! Budget26 is not about soothing agriculture with words. It is about deciding what kind of agriculture India wants for the next decade. For years, the farm sector has absorbed shocks for the economy—pandemics, climate swings, global inflation, trade disruptions—while keeping food available and inflation contained. The expectation now is simple: reward stability with capability. I expect from the Budget26 signal of clarity backed by numbers. PM-KISAN: Support, but with a purpose I expect allocations to move meaningfully higher — to ₹90,000 crore. The increase matters less than the intent. Cash support must become a bridge to productivity for farmers' transition forward, not remain dependent. Pulses & Oilseeds: Strategy needed to scale Allocations must rise sharply — to ₹6,000 crore. This is about fixing India’s weakest link: import dependence that fuels inflation and bleeds billions of dollars. The ask is clear—fund seeds, support cultivation, assured procurement, and decentralised processing as one system. Food Subsidy: Fix the plumbing Outlays must stay broadly stable around ₹2.05 lakh crore. The real reform lies in how the money is used — modern storage, efficient logistics, and smarter buffer management. Inflation today is a supply-chain problem, not a policy announcement problem. Fertiliser Subsidy: Reform, not expand Allocations to hover near ₹1.70 lakh crore. The signal must be a reform roadmap —balanced nutrient use, encouragement of biologicals, better targeting, and soil health as an economic objective. Same money, better outcomes. Crop Insurance: Key to a climate-disrupted world With climate volatility now structural, PMFBY needs boost. Allocations need a 50% push to nearly ₹18,000 crore. Faster, tech-driven assessment and timely settlement must replace delayed compensation. Storage & Warehousing: Anti-inflation infrastructure This is where Budget26 can quietly make a big impact — double support to ₹15,000 crore. Scientific storage protects farmers at harvest and consumers later. This is reform without noise. Digital Agriculture: From pilots to platforms Funding needs more than double — to ₹4,000 crore, not investments but spending. Digital crop estimation, land records, farmer databases, drones, and remote sensing are no longer experiments. They are core economic infrastructure. The bottom line Budget26 should not be written to win applause; it should be written to earn credibility. Agriculture no longer needs firefighting budgets that respond to crises after they erupt. It needs systems that anticipate stress, absorb shocks, and reward efficiency. The signal must move decisively—from uncertainty to predictability, from ad-hoc subsidies to productivity-led outcomes, from noise to direction. Indian agriculture has already delivered stability to the economy. The budget must now return the favour by delivering capability, competitiveness, and confidence back.

India’s Electricity Bills Are Changing From 2026 From Jan 1, 2026, India will move to a “One Market, One Price” system for electricity. Here’s everything you need to know 👇 1️⃣ Market Coupling Begins – All power exchanges will have a single price, decided through market coupling (regulated by CERC). 2️⃣ What It Means – ✅ No more regional price gaps ✅ Transparent electricity trading ✅ Less scope for manipulation 3️⃣ Subsidies Continue (For Now) – • Delhi → Free up to 200 units (extended FY 25–26) • Karnataka → 200 units free (Gruha Jyoti scheme) • Bihar → 125 free units (from Aug 2025) • Punjab → Subsidy continues ⚠️ No blanket removal of free power — it’s state-driven. 4️⃣ Will Bills Rise? – Some states may cut subsidies if budgets tighten. Smart meter rollouts may add extra charges. But ❌ there’s no universal ₹600–₹1000/month hike. 5️⃣ Who Feels It Most? – 👨👩👧 Middle-class families 🚜 Farmers 🚗⚡ EV users 🏪 Small businesses 6️⃣ What You Can Do – ✅ Track usage with smart meters ✅ Use heavy appliances (AC, geyser, EV charging) during off-peak hours ✅ Save energy = Save money ⚡ Bottom Line: India’s power sector is entering a new era. Prices will become more uniform & transparent — but the real impact on your bill depends on your state’s subsidy policy. 📌 Save this post 📤 Share with your family & friends (they’ll thank you!) 👉 Follow @marketing.growmatics for fact-checked business breakdowns #ElectricityBills #PowerSectorIndia #EnergyNews #MarketCoupling #IndianEconomy #SubsidyUpdate #BusinessNewsIndia #StartupInsights #MarketingGrowmatics #MoneyMatters #IndianStartupScene #PolicyUpdate #FactChecked