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ARTICLE AD BOX
Summary
Soaring crude oil prices triggered by the Israel-US-Iran war are straining India's economy, exposing its heavy dependence on imported fossil fuels and a fragile energy strategy.
The global situation in the oil market has been steadily worsening. This is putting a huge stress on India. India's petroleum consumption depends on 85% of imported crude oil. Also, India imports 50% of its Gas consumption. Since the beginning of the Israel-USA-Iran war, the crude oil price has risen from US$ 65/barrel to nearly US$ 105. Around 7 barrels make a tonne, and India imports around 240 million tonnes of crude oil. This, along with the disruption in world trade, has raised India’s exchange rate to ₹95 per US$. The government has maintained consumer prices for petroleum products by cutting excise rates and has made oil companies absorb the losses. This has also worsened the fiscal deficit.
Now that the Bengal election is over, and the war does not seem about to end, the PM has appealed to people to cut down on petroleum product consumption and conserve foreign exchange. A much more effective way to reduce consumption would be to raise prices. That, I don't think the government can delay much.
Our domestic crude production is not rising; it has stagnated around 30 million tonnes and, in recent years, has even declined. Although we have in abundance coal, we are still importing 20 % of our use. And the climate change concern has forced us to reduce its use. Thus, our energy security is almost non-existent. We have a long-term plan of replacing fossil fuels with renewables. Fortunately, these have become cheaper and more competitive. That, however, does not help us in a crisis such as the Iran War has created. Nuclear has not lived up to its promise. Cost and time overruns pushed nuclear into the background. Our fast breeder reactor has only recently gone critical. It is a vital link in the expansion of nuclear power. A fast breeder reactor produces, along with electricity, more plutonium. A thorium blanket around the core can be converted into fertile material and can power thorium-based power plants. We have an abundance of thorium. Yet this still remains a long-term dream.
What should and could we do?
We need to rapidly substitute fossil fuels with other domestically available resources. We need to make the power sector largely based on renewable power, such as solar, wind, hydro, biomass, etc. We have ambitious targets for non-fossil power generation. However, we need to have a consistent technological road map. Our solar and wind power is not available round the clock, only when the sun shines or the wind blows. Thus, we need a balancing power, such as power storage in batteries or hydro power plants. Our solar power capacity has increased significantly, but the corresponding balancing capacity has not. Thus, there is no demand for all the solar power that is generated. The price of power in the afternoon in recent times on the power exchange has fallen to less than 30 paise per unit, but on the same day at night it reaches ₹8 to 10 per unit. Thus, investors are reluctant to expand solar capacity. If we have abundant, cheap electricity available, many uses of gas and petroleum products can be replaced by electricity.
Cooking by piped natural gas or LPG can and should be replaced by electric cooking. Induction cookers are available, and as we have connected 95% of the households with power, this can be done rapidly. However, the power supply has to be with a stable voltage and around the clock.
The most difficult part is the use of petroleum and diesel in transport. EVs need to be expanded rapidly. However, EVs cost more because of the battery cost. Significant increase in R&D is needed to develop an equally efficient and low-cost battery that does not require Lithium. Rapid expansion of the charging infrastructure is needed.
Around 60 MT of diesel is used in
In 2025-26, India’s consumption (including projections for March 2026) will be about 270 million tonnes (Mt). Of this, 132 Mt, or about 54 per cent, is accounted for by transport fuels, of which 60 Mt of high-speed diesel (HSD) is used by heavy and light commercial trucks, 22 Mt of diesel by other vehicles, 40 Mt of motor spirit, and around 10 Mt for aviation fuel.
Of the 60 Mt of HSD, 50 Mt is used by heavy-duty trucks, largely for long-distance freight movement.
Goods transport by trucks rather than rail is preferred for several reasons: Railways cost more; truck movement is more reliable and on time; trucks deliver goods door to door; trucks ensure secure movement of goods; movement by railways involves extra loading and unloading.
The Railways can take care of all these. In fact, the Western Dedicated Freight Corridor (DFC) between Palanpur in Gujarat and Rewari in Haryana covers the 630 km distance in 12 hours. It is also facing a shortage of flat wagons on which trucks can be wheeled. Scheduled goods trains in the T-o-T (Trucks-on-Train) mode, where fully loaded trucks are wheeled onto the train and, at the destination, wheeled out, can address this. The freight rate charged by railways is competitive.
Currently, the Railways are facing a shortage of flat cars. This can be quickly expanded. The other DFCs under construction should be sped up, and scheduled goods trains should run even on shorter routes between major cities. We should target shifting 50 per cent of long-distance goods traffic currently carried by trucks to railways by 2030, and 90 per cent by 2035. This will reduce diesel consumption by trucks by 25 Mt by 2030, reducing total petroleum product consumption by around 10 per cent by 2030 and 20 per cent by 2035.
The PM asked people to use public transport. Providing economic incentives would be more effective. If a trip by public transport is cheaper in cost and time, the public will use it.
The government needs to take many actions to reduce the use of petroleum products.
The author is chairman, Integrated Research and Action for Development (IRADe) and former member for energy at Planning Commission of India.
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