Everything You Need to Know About India’s Energy Policy


Critical Assessment of India’s Energy Scenario, India’s Energy Driven Foreign Policy, India’s Energy Security Considerations- 2025, Energy Security in India: Domestic Issues


Energy has been universally appreciated as one of the most significant factors for economic growth and overall human development. There is a strong two way relationship between economic development and energy consumption. One the one hand, growth of an economy, with its global competitiveness, depends on the availability of cost-effective and environmental friendly energy resources and on the other hand, the overall growth of economy is dependent on the energy demand. Therefore, it would be hardly surprising that a country’s aspiration for economic growth and sustainable development brings it face to face with the necessity of substantially augmenting its energy production.


As per the available statistics, India draws most of its electricity from thermal sources, especially coal. In fact, about 55 percent of the commercial energy need is met by coal fuelled plants. Hydro electricity comes at second at 18.2 percent, followed by renewable sources which provide small share of the electricity at about 15 percent. And, nuclear reactors provide 3 percent of the total energy production.

A number of policy reforms over the past two decades have shifted India’s energy sector from a predominantly government owned system towards one based upon market principles, offering a more level playing field for both public and private sectors. In addition to this, political complexity and a tradition of socialist economic practices have hindered the complete liberalization of India’s energy sector, resulting in sub optional outcomes. The main objective of providing energy access to the whole population led to the policies meant to protect the poor, but, unfortunately resulted in system of untargeted producer and consumer subsidies that prevent a more through implementation of a well operating and financially strong energy sector. At present, India’s energy sector is increasingly unable to deliver a secure supply of energy amid growing demand and fuel imports. In combination with a rising subsidy level and failure to ensure proper revenue collection, the overall financial capability of energy sector has been significantly undermined. In addition to this, lack of sufficient capacity of ensuring timely and adequate investment are indicating that India is heading towards energy crises.


At this point of time, it would be the urgent need of the hour for India’s economic planners to re strategize its energy sector, and work towards enhancing energy security of the country. And, this demands a multi pronged strategy both in the area of demand and supply, along with multiple facts of energy policy such as pricing, regulation and distribution etc.

Similarly, development of renewable and nuclear energy sectors, are also important elements of its strategy. In addition to this, technological advancements would be a significant input, especially in the area of energy efficiency. Therefore, India’s energy strategy would necessarily include action on both demand and supply sides with due consideration to policy, finance and technology.



Energy security is an issue which has lots of geopolitical and international aspects. It is maintained by strategic planning to ensure diversity of fuel, supply source as well as efficiency and flexibility in energy sector. Defining various threats related to energy security is a daunting task, since it is a wide ranging concept covering end number of dimensions such as access to fuel, sate transit and processing as well as the protection of the environment and resources etc.


Over the centuries, Central Asian region has been India’s door to the outside world and has deeply influenced its history, culture and polity. India has always described this region as its “extended neighborhood”. The region has provided link in the forms of “Silk route” between China and India and Europe till the discovery of sea route during the fifteenth century.

It is estimated that in the first half of the twenty first century, India is likely to become one of the top five consumers of energy. And, in order to fulfill the growing needs of its expanding economy, it is bound to look for alternate sources of energy. And, it’s growing demand for energy along with its aspiration of becoming a global power, underlines its interests in the Central Asian region. And, it is in this context, that the Central Asian Strategy finds resonance with India because of the potential of realizing Turkmenistan – Afghanistan – Pakistan – India (TAPI) gas pipeline. In fact, integrating Central and South Asia are part and parcel of India’s long term strategic partnership. Taking full benefits of this concept would result in vast economic benefits to all the stake holders leading to a positive outcome for stability and security in the region.

India has made some important steps in the right direction recently. The Third Connect Central Asia Dialogue organized in October 2014 in Dushnbe, Tajikistan is a laudable step towards building a long term partnership in this region. India is now looking at the region through the framework of its. “Connect Central Asia” policy, which is based on pro-active political, economic and people to people engagement with the region.

Now, it is extremely important in the India’s interest that is should ensure cooperation with the region thereby reducing the possibility of the region to engage into hostile environment against India which must be the first and foremost priority in order to achieve its foreign policy initiatives. India must pursue its ‘Connect Central Asia Policy’ enthusiastically, irrespective of its unimpressive gains till now, in order to achieve reasonable success in the reasonable success in the regional, economic trade and energy cooperation with their countries. It can prove to be beneficial in enhancing India long time planned attention in view of its further relations with Central Asia.


India’s Energy Security Considerations- 2025

According to a report released by the International Energy Agency, India is projected to achieve the highest average real GDP growth of 6.4% during 2008-2035 as compared to that of 5.7% by China. Also, along with this, India is likely to reach the highest primary energy demand in the world during the above mentioned period which is 3.1% per annum as against 2.1% by China. Thus, it is very much clear from the above mentioned data that economy and energy are deeply inter-related and energy availability is the key to economic growth and higher economic growth is driven by increasing energy consumption, i.e. growth demands energy. Following this, the Indian economy which is expected to grow at over 5% per year for the coming 25 years has developed a great appetite for energy. As of today, it is the 5th largest consumer of energy in the world and by 2025 it is expected to become the third largest surpassing Japan and Russia. Also, India’s demand for oil alone is likely to increase at an average rate 2.9% annually, but India has only 0.4% of the worlds proven oil reserve which clearly indicates that the country will remain a major importer of oil. Also, if the consumption of coal follows the same pattern which is its primary source of energy, India is projected to run out of its most of the coal reserves in the next 40 years. In addition to this, its domestic natural gas reserves are also very limited and the domestic gas production is not sufficient enough to fulfill the increasing demand.

Taking into account the current status of energy security, the government has implemented various policies in order to fulfill the continuously growing energy demand. Some of the policies thus implemented can be summed up as follows:

  • Enhancing fuel efficiency through a cut in state subsidies on all the petroleum products, except some household requirements such as cooking gas & kerosene oil which get up to 40% subsidy in order to benefit the poor.
  • During the last five years the government has adopted a new exploration licensing policy which is aimed at promoting investment in the exploration and production of domestic oil and gas. Along with this, privatization of the oil sector, removal of bureaucratic hurdles and favorable environment for business could improve India’s energy security.
  • India is probably the only country is the world having a ministry completely dedicated for the production of energy from renewable energy sources. The government is promoting the production of ethanol from sugar cane and bio-diesel from trees such as jatropha, Karanja and Mahua. Also, India is emerging as a growing market for solar, wind and hydroelectric power.
  • In addition to its accelerating efforts at the domestic front, Indian companies have succeeded in getting a significant foothold and currently functioning in 14 countries with a production of more than 100,000 barrels of oil gas per day in Sakhalin, Sudan and Vietnam.
  • In refining and marketing, the country has introduced liberal policies. Investments in the refining sector have been opened and companies investing more than Rs 20 billion in the domestic oil and gas sector are being granted the rights to market petroleum in the country.
  • India has sought enhancement in its energy security by developing energy for supplying oil and gas across and within its borders.


Following the global trend towards deregulation and privatization in the energy sector, India should also adopt an energy security strategy in which the government intervention is minimum. Also, in order to promote domestic energy use in an efficient and sustainable manner, India needs a more coherent policy framework. The new governmental initiative to turn to renewable energy is a necessary step in this regard. As an energy poor country that wishes to harness the atom for electricity generation, India is all set to develop a self-sustaining plutonium economy for its breeder reactors.


Energy Security in India: Domestic Issues

According to the Statistics industrial sector in India is the largest consumer of energy followed by the transport sector. While the industries are the largest consumer of coal and natural gas, the transport sector is the largest consumer of petroleum.

But, as the country’s domestic energy production is not sufficient enough to meet the demand, it has to depend upon the imports of various sources of energy. Therefore, taking these factors into consideration, the country’s policy makers are focusing on two major aspects; minimizing energy deficiency and development alternate sources of power generation.

According to the assumption made by the energy experts, India’s energy deficiency is likely to increase in the future and this assumption is based on the fears expressed by India’s producers of oil, coal and natural gas on limited improvements in their production for the next few years. It clearly means that India has to depend largely on fuel imports and its energy security is going to be more vulnerable to sudden changes like decline in global energy production, disaster, price hike or political upheavals in the originating countries. It is estimated that about 53% of the commercial energy consumption would have to be imported by 2031-32 which was about 25% as in 2004.

Thus taking into account the issues related to production and imports, India has been trying to generate energy from hydro, wind, solar and nuclear power for many years. In fact in the case of hydropower, India holds seventh position in the world with its hydroelectricity contributing 18.2% in its domestic electricity generation. Apart from this, India has proved its capacity in the fields of wind and solar.

However, despite these notable achievements in renewable energy sector, the entire energy sector in India is suffering from several constraints and issues which are continuously hampering its overall growth. Some of these issues can be summarized as follows:

  • The oil and gas industry in India is suffering from an acute shortage of skilled human resources. The industry is unable to attract young talents because of lack of awareness about the career opportunities in the industry.
  • Poor infrastructural facilities are another major problem which our oil and gas companies are exposed to. Because of the limited availability of natural gas, inadequate transmission and distribution pipelines, India’s natural gas infrastructure is still underdeveloped. Country’s pipelines density is much lower as compared to that of United Kingdom or China, which results in limited contribution of natural gas in India’s energy mix which is merely 10% against the global average of 24%.
  • Establishment of hydroelectricity power projects often leads to serious dispute between the neighboring states, between center and states and between the government and the people. These problems arise mainly because of issues regarding construction of dams, flood and environmental and livelihood concerns.
  • Another major issue related to the domestic energy scenario is the unequal distribution of energy among the consumers and inefficient management of energy demand. A major portion of the power in India goes to the upper and the middle classes.


Today’s energy policy is largely influenced by various factors such as the changing pattern of energy trade, means of minimizing dependence on decreasing energy resources, changing relationship between the energy exporter and importer countries and environmental concerns etc. Therefore, the energy planners of the country should evaluate both the internal and external factors while formulating energy policies for the nation. The policy should aim at ensuring steady supply of home grown production, effective management of existing energy resources. In addition to this, proper infrastructure for extracting, developing and transporting the energy resources must be encouraged.