Iran war highlights why India must rethink its energy dependencies

If there is one piece of advice India must take from Donald Trump, it is 'drill, baby, drill'

No matter how the Iran-Israel-US war ends, and no matter how soon it ends, India now has to rethink its energy dependencies — not to speak of dependencies in other areas. In energy, we need deeper atmanirbharta, arguably even more than in defence. The ongoing cooking gas shortage, which has become every household’s and restaurant owner’s core short-term concern, tells us why. It can roil politics more than a limited setback even in defence.

 

India’s excess dependency on oil and gas imports should prompt us to not only build larger reserves of the former (and as much of the latter as feasible), but also lead to further geographical diversification. We cannot simply have a 60-65 per cent import dependency in liquefied petroleum gas (LPG), the bulk of which comes from just one volatile region — West Asia.

 

At the broader energy security level, India has directionally been on the right track. The share of non-fossil fuel power capacity has now crossed 50 per cent of the overall installed capacity of 509 Gw. But the problem relates to concentrated dependence on some regions driven by policy priorities. The growing dependence on West Asia for gas supplies is directly related to the huge expansion in household cooking gas consumption and the increasing use of gas in the transport sector.

 

As Shamika Ravi, a member of the Economic Advisory Council of the Prime Minister, noted in a post on social media site X (formerly Twitter), “Indian households now depend on petroleum products for both cooking (LPG) and transport...Together, LPG + conveyance account for 7.5-10.2 per cent of monthly budgets. This makes our households doubly exposed to any oil supply disruption — a vulnerability that did not exist at this scale in 2011, when rural LPG adoption was just 17 per cent and conveyance 4.2 per cent.”

 

While trying to address pollution and climate change, we may have given less importance to domestic production of fossil fuels, which are going to be important over the next two decades, coinciding with the period when India must maximise its demographic dividend. There is no place for fossil fuel complacency, never mind what climate activists and greens tell you.

 

If there is one piece of advice we must take from Donald Trump, it is this: “Drill, baby, drill”. It means more and faster exploration and production investments.

 

What we must also thank Mr Trump for is exposing our vulnerabilities. Our dependence on West Asia, especially those supply sources that are routed through the Strait of Hormuz, cannot sustain. The major West Asian oil and gas producing countries are on either side of the narrow shipping waterway leading to the Strait, but they are now subject to Iran’s security priorities. Bahrain, Qatar, Oman, the UAE and even Saudi Arabia have most of their production going through the Strait of Hormuz.

 

In the 15th century, the Portuguese realised that the trade in spices and other goods from India was subject to extortion by West Asian and Venetian merchants, and Vasco da Gama was commissioned by Manuel I of Portugal to find a new sea route to India. While Vasco da Gama is not a revered name in post-colonial Indian history, he did find a different route to India via the Cape of Good Hope. This is our challenge if we choose to tap into West Asian fossil fuels — finding a new route that avoids the Strait of Hormuz.

 

India’s proposal for the IMEC corridor (India-Middle East-Europe Economic Corridor) involves building transport infrastructure going through the UAE, Saudi Arabia, Jordan, Israel, and Greece. Some of these countries are going to be under Iranian threat, which may make the corridor unviable unless there is a wider peace deal in West Asia, where both Israel and Iran agree to back off from threatening the other. Iran needs to do more, since its theocracy has put Jew-hatred and a commitment to destroy Israel at the core of its wider Islamist mission, which includes supporting proxies in Lebanon (Hezbollah), Yemen (Houthis) and Gaza (Hamas). More than stopping Iran’s nuclear ambitions, it is these ever-present threats to Israel’s borders that need reining in — and only Iran can do that. Israel and the US have not helped matters by decapitating the Iranian leadership, making the successor regime’s willingness to do a deal more unlikely.

 

The IMEC is not going to work in the foreseeable future. We need different sources to fill in whenever supply disruptions hit the Strait of Hormuz. Dependence on West Asia is only a fair-weather option for us. Whenever peace reigns, we can use this region to augment or stock up reserves at low prices. Over the medium term, we must ask Qatar, the UAE, and Saudi Arabia to build shipping capabilities far away from the Strait of Hormuz and the Red Sea areas that the Houthis can target. And, of course, we must fast-track domestic exploration and production of oil and gas, especially the recent discoveries off the Andamans. We should also be fast-tracking the use of ethanol for cooking purposes, using appropriate stoves.

 

However, it is not only in energy that we must reduce over-dependence on a few sources of supply in troubled parts of the world. This should be our guiding philosophy in all critical areas, both in imports and exports.

 

Three areas, apart from energy, stand out. One is our over-dependence on Chinese supplies in everything from rare earths to electronic components and other things. Production-linked incentives are important, but ease of doing business is even more vital. Two, our software services are too focused on North America, the US in particular. But margins aren’t everything. The Infys, TCSes and Wipros must be prodded to diversify markets over a 10-year period. Their share of non-American and domestic Indian business must grow substantially, and products and sovereign platforms must be a larger share of their business.

 

Our dependence on foreign tech platforms — from Google to Microsoft, Meta and X — is a strategic vulnerability, not least because these firms are heavily involved in the US’ national security architecture. If they had to choose between following Indian interests and American ones, no prizes for guessing which way they will tilt. We must have our own sovereign email, messaging, social media platforms, artificial intelligence models, office and Cloud services that will counterbalance US Big Tech. Our data should not be shareable with Uncle Sam, unless when authorised by Indian courts.

 

A sobering thought: Atmanirbharta is not without costs. There will be higher costs, and slimmer margins. That, unfortunately, is the price for strategic autonomy.

 

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The author is a senior journalist