Context: India's energy security challenges may escalate in future, particularly, due to the recent geopolitical tensions in the Middle East, which may cause volatility in crude oil prices and pose a risk of supply-chain disruption.
India’s Crude oil dependence:
- India is the world's third-largest importer of crude oil, and the third-largest consumer of oil overall, behind the US and China.
- According to the Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Petroleum & Natural Gas, India imported 232.5 million tonnes of crude oil in the financial year 2023-24.
- India's crude oil import dependence increased to 87.7% in 2023–2024, up from 87.4% in the previous year. This is due to a combination of high demand and stagnant domestic production.
- Russia is India's top oil supplier, accounting for more than 30% of India's imports in 2023. Before the Ukraine conflict, Iraq was India's top supplier of crude oil, followed by Saudi Arabia and the United Arab Emirates. However, after the invasion, Russia climbed to the top, driven by substantial discounts on oil prices.
- Nevertheless, over 40% of India’s oil at present is sourced from the Middle East region, and the recent geopolitical tensions in the region may pose supply disruptions.
India’s present options:
- Increasing supply from Russia: India is exploring options to increase purchase from Russia through the Chennai-Vladivostok route (which passes through the Sea of Japan, the South China Sea and Malacca Strait), in case the traditional route through the Red Sea cannot be used.
- Importing Liquefied Natural Gas (LNG): India, the world's fourth-largest LNG importer, seeks to diversify its LNG import options to ensure stable and secure gas supplies. India imported a total 19.85 million tonnes of LNG in FY 2022-2023, of which 10.74 million tonnes, or 54%, came from Qatar.
- Buildingtransnational pipelines: Transnational pipelines could have been an alternative for India, but certain political reasons have hindered their success.
- Myanmar-Bangladesh-India gas pipeline did not fructify because the Bangladesh side, due to domestic political compulsions, wanted certain bilateral matters to be included in the tripartite gas agreement which were not acceptable to the Indian side.
- Iran-Pakistan-India gas pipeline project, despite agreement on several technical and commercial issues, did not progress due to political instability in Pakistan.
- Turkmenistan-Afghanistan-Pakistan- India (TAPI) gas pipeline project had problems due to civil conflict in Afghanistan.
Need for a Long-term integrated energy policy:
- Energy Security Concerns: Over 40% of India's oil comes from the volatile Middle East. Geopolitical tensions and sanctions can disrupt supplies, impacting prices and economic stability.
- Meeting Growing Demand: India's energy demand is projected to surge by 1.8% annually until 2040. A comprehensive policy ensures sufficient and reliable energy supplies to fuel this growth.
- Domestic Resource Potential: India has an immense potential for renewable energy sources like solar and wind. A well-integrated policy can unlock this potential, reducing dependence on imports and fostering energy independence.
- Environmental Sustainability: India is the world's third-largest emitter of greenhouse gases. An integrated policy that prioritises renewable energy and energy efficiency is vital to meet climate change commitments and ensure a sustainable future.
Way Forward:
The Indian government drafted a National Energy Policy (NEP) in 2017, which aimed to achieve goals like universal energy access, energy security, environmental sustainability, and economic growth through a diversified energy mix. However, India still has not finalised the draft NEP. India’s integrated energy policy should focus on:
- Energy Mix Diversification: Overreliance on any single source of energy can pose risks to energy security. A diversified energy mix can enhance resilience and mitigate supply disruptions. India needs a balanced approach that optimises fossil fuel use, promotes renewable energy integration, and explores cleaner options like Nuclear Energy and Hydrogen.
- Renewable Energy Promotion: India has made significant progress in renewable energy, particularly in solar and wind power. A long-term energy policy should prioritise the promotion and expansion of renewable energy sources. This can be achieved through incentives, subsidies, and supportive regulations to encourage investments in renewable energy projects.
- Infrastructure Development: India needs to upgrade the power grid infrastructure for integration and management of renewable energy sources. The policy should prioritise investments in grid modernisation, including the development of smart grids and energy storage systems.
- Energy Conservation: Promoting energy conservation across sectors (industries, buildings, and transportation) can significantly reduce India's overall energy demand.
- Research and Development: Encouraging research and development in clean energy technologies can ensure long-term sustainability, reduce reliance on imported technologies and foster innovations that reduce energy cost.
Conclusion:
India needs a long-term and integrated energy policy that projects the country's energy requirements over the next 25 years, while taking into account domestic production, import requirements of fossil fuels, and our commitments to transition towards clean energy.