Context: Recently, India overtook Japan to become the world’s fourth largest economy with a GDP of over $4.18 trillion. A key pillar behind this growth story is the transformation of India’s energy sector over the past decade.
Relevance of the Topic: Prelims and Mains: State of India's Energy sectors and key reforms.
Key Stats in the Energy Sector in India
- India is the third largest energy and oil consumer. India is the fourth-largest refiner, and fourth-largest LNG importer globally.
- Coal has consistently accounted for over 70% of India's total energy generation. Despite increased domestic production, coal import dependence remains high (26%).
- Crude oil’s share is ~6% in FY24. Natural gas was 7% of the total energy produced in FY24.
- Renewable energy sources (hydro, solar, nuclear) stand at 7% in FY24. The highest potential for energy generation from renewable resources comes from wind (55%), followed by solar energy, and large hydro. India’s total renewable energy-based electricity generation capacity: 203 GW (2024). India’s target: 500 GW from non-fossil sources by 2030.
With energy demand expected to grow two and a half times by 2047 and 25% of incremental global demand is set to come from India, energy security is now viewed as development security.
Indian government’s energy strategy
Indian government’s energy strategy addresses the energy trilemma of- availability, affordability, and sustainability through a four-pronged approach:
- Diversification of energy security sources and suppliers
- Expansion of domestic production of oil and gas
- Transition to renewables like Biofuels, green hydrogen etc
- Affordability (affordable energy access for all sections of society)
Reforms in the Energy Sector:
1. Upstream Oil & Gas Reforms:
- In the upstream oil and gas sector, India’s exploration acreage has doubled from 8% in 2021 to 16% in 2025.
- With a goal of covering one million square kilometres by 2030, the government aims to unlock 42 billion tonnes of oil and oil-equivalent gas.
2. Policy Reforms:
- This expansion has been enabled by landmark reforms such as the reduction of ‘No-Go’ areas by 99%, streamlined licensing through Open Acreage Licensing Policy (OALP) rounds, and attractive pricing incentives for new gas wells.
- The revised gas pricing mechanism, linking prices to 10% of the Indian crude basket and offering a 20% premium for new wells, has enhanced gas availability for city gas networks and industrial usage.
- To reduce costs and accelerate monetisation, new revenue-sharing contracts allow shared infrastructure among Exploration and Production (E&P) players.
3. Technological and geophysical efforts have complemented policy reforms:
- National Seismic Programme, Mission Anveshan, airborne gravity gradiometry (AGG) surveys, and continental shelf mapping have expanded data and exploration confidence, especially in frontier basins such as the Andamans, the Mahanadi, and the Cauvery.
- ONGC and Oil India have together made over 25 hydrocarbon discoveries across the Mumbai Offshore, Cambay, Mahanadi, and Assam basins in the last four years. Noteworthy among these are- Suryamani and Vajramani wells on the west coast offshore and the Utkal and Konark fields on the east coast deep waters.
- These discoveries add over 75 MMtoe (million metric tonnes of oil equivalent) and 2,700 MMSCM (million metric standard cubic metres) of gas to India’s reserves.
4. Downstream infrastructure has seen parallel expansion:
- India now operates 24,000 kilometres of product pipelines, nearly 96,000 retail outlets, and has significantly strengthened its strategic reserves and LPG storage.
- Over 67 million people visit petrol pumps daily, which is testimony to the scale and efficiency of India’s fuel supply ecosystem.
- India’s city gas network has grown from 55 geographic areas in 2014 to 307 in 2025, with piped natural gas (PNG) connections up from 25 lakh to 1.5 crore and over 7,500 compressed natural gas (CNG) stations in operation.
- Unified pipeline tariffs and city gas expansions have ensured affordable access even in distant States.
Transition to Renewables
1. Biofuels and Ethanol:
- Biofuels have emerged as a cornerstone of India’s green strategy.
- Ethanol blending in petrol has surged from 1.5% in 2013 to 19.7% in 2025. Blending quantities have expanded from 38 crore litres to 484 crore litres.
This has saved 1.26 lakh crore in foreign exchange, reduced emissions by 643 lakh MT, and paid ₹1.79 lakh crore to distillers and over ₹1 lakh crore to farmers. Feedstock diversification ranging from molasses to maize has created a robust ethanol ecosystem.
2. Compressed Biogas:
- Sustainable Alternative Towards Affordable Transportation (SATAT) initiative commissioned over 100 compressed biogas (CBG) plants and aims for a 5% CBG blending mandate by 2028.
- Central support for biomass procurement and CBG-pipeline connectivity is accelerating circular energy adoption.
3. Green Hydrogen:
- Green hydrogen has been given a massive thrust with 8.62 lakh tonnes of production and 3,000 MW of electrolyser tenders awarded.
- Oil public sector undertakings are leading from the front- Indian Oil Corporation Ltd. recently awarded a landmark 10 kilo-tonnes per annum (KTPA) green hydrogen tender to L&T. Numaligarh Refinery Limited (NRL)’s green hydrogen unit in Assam is poised to become a first in the northeast.
4. Natural Gas:
- India’s natural gas pipeline network now spans over 25,000 km; it targets 33,000 km by 2030.
- Strategic pricing reforms and inclusion of gas in the ‘No Cut’ category for transport and domestic segments are ensuring supply stability.
- Gas production has increased steadily from 28.7 billion cubic metre (BCM) in 2020-21 to 36.4 BCM in 2023-24, with further growth projected.
- Oilfields (Regulation and Development) Amendment Act 2024 has enabled hybrid leases, allowing renewables alongside hydrocarbons.
- Discovered small fields (DSF) fields now operate under simplified contracts with minimal compliance burdens, unlocking marginal fields across basins. These sweeping policy reforms show that we are ready to tweak and do more to make India’s upstream sector as competitive as any in the world.
- Through the PM Gati Shakti, the Ministry of Petroleum and Natural Gas has digitally mapped over one lakh assets and pipelines. Integration with the National Master Plan ensures real-time project visibility and synergy across ministries. Key projects such as the Indo-Nepal pipeline and Samruddhi Utility Corridor have benefited from route optimisation and cost savings of over ₹169 crore.
Affordability Reforms:
- Despite global LPG prices rising by 58%, Pradhan Mantri Ujjwala Yojana (PMUY) beneficiaries pay ₹553 per cylinder, supported by targeted subsidies and compensation to oil companies.
- Fuel prices in India have been kept stable through excise cuts, insulating citizens from volatility seen in neighbouring countries.