Double down on domestic oil and gas

India can shape a pragmatic model that offers clearances in a predictable time frame, balances environmental oversight, and creates confidence for long-term investors

- DHANENDRA KUMAR

On August 6, US President Donald Trump signed an executive order adding a 25% tariff (beyond an earlier 25% imposed in July) on certain Indian imports because New Delhi continues to buy discounted Russian crude, raising the effective rate to 50%. The ministry of external affairs described the actions as "unfair, unjustified and unreasonable", and "extremely unfortunate". The White House order explicitly linked the measure to India's purchases of Russian oil. Markets have already begun pricing the geopolitical risk, and Indian exporters, of goods from leather to light engineering, are bracing for the additional bazooka. For an economy that imports the bulk of its crude, the tariff lands squarely on the country's energy security.

This comes at a time when India's energy appetite is expected to grow rapidly, driven by industrialisation and urbanisation; in fact the needs are existential. The ministry of statistics reported that in FY24, crude oil imports rose to 234.26 million tonnes. Import dependence remained high at around 89% for crude oil and 25.86% for coal, according to the ministry of petroleum and natural gas.

A domestic push linked to structural reform India's long-term resilience depends on how effectively it develops its own reserves. As of April 2024, the country's crude oil reserves stood at 671.40 million tonnes, but production in FY24 was just 29.36 million tonnes. This mismatch in the new urgency underscores the need for quick action. Ageing fields and a reliance on public sector undertakings highlight why a stronger role for private players is needed.