India’s growth ambitions rest on a simple but unforgiving reality: development needs reliable, affordable, and uninterrupted energy. Over the past few years, the country has managed short-term shocks with notable skill, insulating consumers from volatile global fuel prices. Yet beneath this success lies a deeper challenge — how to ensure long-term energy security without exhausting fiscal buffers or slowing economic momentum.
How India managed recent global energy shocks
Union Petroleum and Natural Gas Minister Hardeep Singh Puri has repeatedly highlighted that while fuel prices surged across major economies, India largely shielded its citizens from the worst impact. This was achieved through a combination of calibrated excise duty adjustments, diversification of crude oil import sources, and long-term supply contracts.
A critical, though less visible, factor was the role of public sector oil marketing companies, which absorbed a significant portion of global price volatility. While this strategy stabilised domestic prices, it also placed sustained pressure on government finances and corporate balance sheets — a solution that cannot be stretched indefinitely.
Why diversification alone is not enough
India has reduced its vulnerability to geopolitical disruptions by diversifying energy imports and supply routes. However, diversification does not equal self-reliance. As long as India remains heavily dependent on imported fossil fuels, global price swings and geopolitical tensions will continue to shape domestic energy outcomes.
The core issue, therefore, is not just managing volatility but building resilience — the ability of the energy system to absorb shocks without repeated fiscal intervention.
Rising demand: the scale of the challenge
India is now the world’s third-largest energy consumer. Growing incomes, expanding mobility, urbanisation, and rising consumption of goods and services ensure that energy demand will continue to rise rather than plateau.
This makes the policy challenge twofold:
- Ensuring price stability so that growth is not disrupted.
- Securing adequate energy supplies without compromising long-term sustainability.
Energy security, in this context, is inseparable from economic security.
Balancing transition with affordability
The government has emphasised that energy transition, energy security, and system resilience must move together. In principle, this is sound. In practice, it is difficult. India’s rapid expansion of renewable energy capacity has been impressive, but it has coincided with relative under-investment in oil and gas.
For a developing economy where affordability remains critical, conventional fuels cannot be phased out abruptly. Oil and gas continue to play a stabilising role, particularly because non-conventional energy sources still involve higher system-level costs once storage, grid upgrades, and backup capacity are factored in.
Limits of renewables without system reform
Solar and wind power are central to India’s transition, but they are inherently intermittent. Their effectiveness depends on complementary investments:
- Large-scale energy storage solutions.
- Modernised and flexible electricity grids.
- Backup generation to manage variability.
Without these, renewables risk remaining supplementary rather than substitutive — adding capacity without fully displacing fossil fuels.
Promise and constraints of alternative fuels
Emerging options such as green hydrogen, biofuels, ethanol blending, and compressed biogas offer pathways to reduce import dependence. However, their scaling is constrained by unclear pricing signals, slow regulatory approvals, and limited private sector participation.
For these alternatives to move beyond pilot projects, policy certainty and market incentives must improve, enabling industry to invest with confidence.
The road ahead: beyond fiscal cushioning
India’s recent handling of energy turbulence has been effective, but future challenges will be more structural than cyclical. Price stability cannot rely indefinitely on excise adjustments or public sector absorption of losses.
Long-term energy security will depend on accelerating domestic capacity, improving efficiency, fostering innovation, and aligning transition goals with economic realities. The real test for India lies not in managing the next global shock, but in building an energy system resilient enough to withstand it.
What to note for Prelims?
- India’s position as the world’s third-largest energy consumer.
- Difference between energy security and energy self-reliance.
- Role of oil marketing companies in price stabilisation.
- Key alternative fuels: green hydrogen, biofuels, ethanol blending.
What to note for Mains?
- Trade-offs between energy transition and affordability in India.
- Fiscal and institutional limits of fuel price insulation.
- Role of renewables in long-term energy resilience.
- Policy challenges in achieving energy security without slowing growth.
