India's Energy Security Journey: Challenges and Opportunities

Energy security refers to the uninterrupted availability of energy sources at an affordable price. In the Indian context, it involves ensuring reliable access to oil, gas, and electricity while minimizing vulnerability to external shocks such as geopolitical conflicts. A key dimension of energy security is reducing dependence on imports, especially in hydrocarbons like crude oil and natural gas, which are critical for transportation, industry, and household consumption.

Over the past decade, India’s import dependence has paradoxically increased despite policy efforts to reduce it. Crude oil import dependence rose from about 80.6% to 88.6%, while natural gas dependence increased from 40.7% to 50.1%. This trend reflects stagnant domestic production and rising energy demand due to economic growth. For instance, domestic output has remained nearly flat due to aging oil fields and limited new discoveries.

The implications are significant. High import dependence exposes India to global price volatility and geopolitical risks, as seen during the West Asia crisis affecting LPG supplies through the Strait of Hormuz. Thus, energy security for India is not just about supply, but also about resilience, diversification, and long-term sustainability.

India’s inability to reduce hydrocarbon import dependence stems from a combination of structural, geological, and policy-related challenges. While the government introduced numerous reforms such as the Hydrocarbon Exploration and Licensing Policy (HELP), Discovered Small Fields Policy, and the Oilfields Amendment Act, 2025, these have not translated into a significant increase in domestic production. The primary reason is that India’s hydrocarbon reserves are relatively mature, with aging oil fields leading to declining or stagnant output.

Another critical factor is the nature of the exploration business itself. Oil and gas exploration is inherently high-risk and capital-intensive. According to industry experts, global investors respond strongly to policy stability and ease of doing business. Frequent policy changes, regulatory complexities, and delays in approvals increase uncertainty, discouraging sustained investment. Thus, despite policy proliferation, the lack of investor confidence has limited outcomes.

Additionally, rising domestic demand has outpaced any marginal gains in production. Economic growth, urbanization, and increased energy consumption have widened the gap between demand and supply. This mismatch has made it difficult to achieve import reduction targets, highlighting that policy reforms alone are insufficient without addressing structural and market realities.

Diversification is a key strategy for enhancing energy resilience, which refers to the ability of a country to withstand and recover from supply disruptions. India has expanded its crude oil import base from 27 countries to over 40, reducing dependence on any single supplier. This diversification helps mitigate risks arising from geopolitical tensions, such as conflicts in West Asia, by ensuring alternative supply routes and partners.

However, diversification remains uneven across energy types. For example, while crude oil sourcing is diversified, LPG imports are heavily concentrated, with nearly 90% coming from West Asia through the Strait of Hormuz. This overdependence became evident during the recent crisis, where disruptions led to shortages and long waiting times for consumers. Thus, diversification must be comprehensive, covering both sources and supply chains.

Beyond imports, diversification also includes expanding the domestic energy basket. Initiatives like electric mobility, ethanol blending, and renewable energy adoption reduce reliance on fossil fuels. For instance, the 20% ethanol blending program saves approximately 44 million barrels of crude oil annually. Together, diversified imports and energy sources create a multi-layered buffer against external shocks.

India’s policy framework for oil and gas exploration has been extensive but not entirely effective. On the positive side, reforms such as HELP, the National Data Repository, and the opening of ‘no-go’ offshore areas have improved transparency and access to geological data. These measures aim to attract private and foreign investment by simplifying licensing and enhancing ease of doing business.

However, the effectiveness of these policies is limited by implementation challenges. The global exploration industry values policy stability, pricing freedom, and operational autonomy. In India, issues such as bureaucratic delays, complex clearances, and occasional contractual uncertainties have increased the risk premium for investors. As a result, capital tends to flow to more predictable jurisdictions, even if their geological prospects are less favorable.

Moreover, the focus on policy quantity rather than quality has diluted impact. While numerous policies have been introduced, they have not sufficiently addressed core concerns like faster approvals and consistent regulatory practices. Therefore, the challenge lies not in creating more policies, but in building investor confidence through stable and predictable governance. A shift from policy proliferation to policy effectiveness is essential for revitalizing domestic exploration.

Renewable energy and alternative fuels have played a growing but still limited role in reducing India’s dependence on fossil fuels. Initiatives such as the FAME scheme for electric vehicles and the ethanol blending program have contributed to lowering oil consumption. For example, ethanol blending increased from 1.5% in 2014 to 20% in 2025, resulting in annual savings of about 44 million barrels of crude oil.

Similarly, the adoption of electric vehicles has accelerated significantly. Under FAME I and II, millions of EVs have been deployed, and the EV market reached 2.3 million sales in 2025, accounting for 8% of new vehicle registrations. These developments have reduced fuel consumption and emissions, particularly in the transport sector, which is a major consumer of petroleum products.

Despite these achievements, the overall impact remains insufficient to offset rising energy demand. Challenges such as inadequate charging infrastructure, high initial costs, and limited battery technology have slowed the transition. Thus, while renewables and alternative fuels are crucial components of India’s energy strategy, their scale and speed of adoption need to increase significantly to make a substantial dent in fossil fuel dependence.

The recent LPG crisis, triggered by disruptions in the Strait of Hormuz due to the West Asia conflict, highlights critical gaps in India’s energy planning. The crisis was characterized by long waiting times for LPG cylinders and supply shortages, primarily due to high import dependence (around 65%) and excessive reliance on a single region for imports. This situation underscores the vulnerability of concentrated supply chains in a geopolitically volatile world.

One key lesson is the importance of diversification. While India has diversified crude oil imports, LPG sourcing remains heavily skewed toward West Asia. Expanding import sources to regions like the United States and Africa can reduce such risks. Additionally, maintaining strategic reserves and improving logistics infrastructure can enhance preparedness for supply disruptions.

Another lesson is the need for a balanced energy mix. Overreliance on a single fuel type increases systemic risk. Promoting alternatives such as piped natural gas, electric cooking solutions, and renewables can reduce pressure on LPG demand. The crisis also highlights the importance of proactive planning rather than reactive measures. Overall, it serves as a reminder that energy security requires integrated, forward-looking policies combining diversification, domestic production, and sustainable alternatives.