India’s recent trade tensions with the United States—highlighted by President Donald Trump’s announcement of a 50% tariff on Indian exports—underscore not only geopolitical flashpoints but also India’s enduring energy vulnerability to unpredictable diplomatic shifts and evolving global alliances. This episode amplifies the importance of a resilient domestic energy strategy, as India remains highly vulnerable to external pressures due to overwhelming reliance on energy imports.
India continues to import nearly 90% of its crude, with energy import dependency remaining one of the highest globally. Experts project that new US tariffs could inflate India’s annual oil import bill by up to $11 billion, severely straining the balance of trade position and foreign reserves of the country. In response to Trump’s threat, India has characterised the tariffs as unjust and unfair and reaffirmed its commitment to energy self-reliance—shifting the policy focus as Indian Prime Minister, Narendra Modi articulated, from government revenue generation to maximising domestic output.
However, rhetoric must translate into action. Heavy import dependence perpetuates risks of price volatility and supply insecurity during all kinds of global disruptions. With domestic energy consumption growing by 7.8% year-on-year in 2023-24 and nearly doubling per capita since 2015, the urgency to bridge the demand-supply gap is not just necessary but an imperative.
This crisis has given the country an opportunity not just to reset its strategic goals but also to double down on enhancing oil and gas production. An important first step is allowing contract extensions for oil and gas fields until their economic life ends. This would not only reduce investor uncertainty, encourage reinvestment, and stabilise cash flows, but also be crucial for attracting greater private domestic and foreign capital. A few strategies need to be undertaken.
The shift to the Revenue Sharing Contract
Another important step would be to allow companies under the Production Sharing Contract (PSC) to shift to Revenue Sharing Contract (RSC) frameworks, to provide operators with greater flexibility and transparency, reducing the risk of litigations and project delays.
The case for self-certification
Accelerating the number of self-certification approvals would help streamline bureaucratic delays, speed up clearances and shave off up to 12 months off project timelines—boosting domestic production efficiency.
Foreign and private investment is the key
Mobilising greater private and foreign investment in the high-risk, cost-intensive deepwater and ultra-deepwater blocks, too, is a must because it demands risk-sharing mechanisms and sizable capital infusion. India’s recent policy opening of new blocks under the Open Acreage and Licensing Policy (OALP) Round X is encouraging but still requires clear fiscal incentives and regulatory stability to attract global players who continue to remain hesitant.
Upstream energy producers remit 60–70% of revenues to the government, compounded by rising production costs, leaving little money in the hands of the operators. Hence, targeted fiscal relief—such as tax incentives for marginal fields, royalty waivers, and support for enhanced oil recovery—can stimulate investment across the sector.
Integrating oil and gas in GST
Finally, there is a need to bring the oil and gas industry under the goods and services tax (GST) framework, which would enable operators input tax credit on goods and services used in the industry, lower operator costs, and improve project viability, making domestic production more competitive.
As the world’s third-largest energy consumer, India’s primary energy demand is projected to continue outpacing domestic supply over the next several decades. The present crisis thus represents a strategic inflection point. India must not allow external trade pressures to dictate its energy trajectory; instead, it should expedite its domestic production ambitions with clarity, urgency, and strong political will.
Hence, aggressive, reform-oriented policy—focused on contract certainty, investment-friendly terms, regulatory streamlining, fiscal incentives, and GST integration—is essential for improving energy security, economic strength, and diplomatic autonomy. These measures can help India chart a more independent and resilient energy future, better equipped to handle the volatility of global markets and shifting geopolitical alliances.
Views expressed above are the author’s own.
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