India's oil reforms to blunt US and European Union supply coercion

India’s energy security will get a leg up amid US President Donald Trump’s tariff rumbles as the government hopes to finalise by September major reforms in the oil and gas sector, a senior government official said.

 

These measures are expected to help the government deal with geopolitical pressures inflicted by countries like the US by squeezing supplies of oil via coercive methods or from armed conflicts in West Asia that block key passageways like the Suez Canal or the Strait of Hormuz through which India receives most of its oil and gas.

 

India’s oil lobby is funding Russian President Vladimir Putin’s war machine and that must stop, said Peter Navarro, White House advisor for trade and manufacturing, in an opinion piece in the Financial Times on Monday — in a move widely seen as mounting pressure on India to stop buying Russian oil. “Refining companies have turned India into a massive refining hub for discounted Russian crude,” Navarro said.

 

The government has no say in where the country’s refiners source oil from because these are commercial transactions, the official reiterated. There are no sanctions on Russian oil unlike, say, Iran or Venezuela, he added.

 

What Navarro conveniently forgot to mention was that China is the biggest buyer of Russian oil, gas, and liquefied natural gas and the only buyer of all sanctioned crude oil including Venezuela and Iran, industry executives said.

 

China bought over $90 billion worth of Russian fossil fuels in the third year of Russia’s invasion of Ukraine, 60 per cent more than India, according to Centre for Research on Energy and Clean Air, a leading Finnish think tank. He also skipped mentioning Türkiye, which bought $41 billion of fossil fuels from Russia during the period.

 

Biofuels and domestic oil production will be the key beneficiaries of these reforms. Legal experts will complete vetting in a few weeks of draft rules under the recently amended Oilfields (Regulation and Development) Act, 1948, which will apply to potential participants like Chevron, Exxon, and Total in the country’s ongoing 10th drilling round.

 

Foreign drillers will be insured against any fiscal policy changes under these new rules, which kept reputed overseas explorers like Exxon, Shell, Chevron, and others from participating in the country’s first nine drilling rounds, the official said.

 

Ethanol blending

 

The ongoing controversy over ethanol-blended fuels will not arrest the government’s ongoing deliberations or proposals on expanding the use of the biofuel because the benefits from ethanol, such as cleaner air and lower oil imports, far outweigh minor issues over mileage or corrosion to motor parts, the official said.

 

An interministerial committee will recommend by September the path to pursue over ethanol — to either go directly to flexible (flex) fuels, say 100 per cent ethanol-fired vehicles, or expand the blending percentage in stages from the current E20 (20 per cent ethanol blended with petrol) to E22 to E25 to E27, the official said. Once the report is out the government will also test the capability of the current crop of E20-compatible vehicles to absorb ethanol-laced petrol of higher percentages such as E22 or E27, depending on the recommendations of the committee.

 

The official said that the automotive industry was completely aware that E20 was a target to be achieved this year, and subsequently the focus will be on flex fuels. “That was what the automotive industry was working on, which means that they got approvals for their investments on what the government was planning.”

 

“But broadly, this was the thing that you know, after E20, we move to flex fuels, and in the meanwhile, the interministerial committee was looking at various options, to get standards developed for E22, E25, E27, so that we can take an informed decision which is the right way to go. Because we can have E20 and then straight away go to flex fuel or you can have E20, then E22, then E25, E27, E30 and then go to flex fuels,” the official added.

 

The government will take it up with any automaker who repudiates a warranty if such a situation arises, the official said, responding to news reports alleging that Suzuki and Hyundai may void warranties if E20 is used in older vehicles. As for insurers, he said that they step in only in case of an accident, which has nothing to do with the fuel you use, he added.

 

“Between E10 and E20, warranty cannot be repudiated because all that happens is that you need to recalibrate your electronic control unit.” It costs just a few thousand rupees to make existing vehicles E20 compliant, the official said, explaining that to enjoy clean air, reduce dependence on imported oil, and add income to farmers, everyone must pitch in, including automakers and citizens.

 

He said that the government’s tax revenues have also suffered because of ethanol, which only carries 5 per cent goods and services tax, unlike other transport fuels, which carry 40-50 per cent in excise and value added tax. In addition, state oil companies are paying more for ethanol, he added.