Katerina Swanson
India has significant domestic fossil fuel resources, with coal, crude oil, and natural gas being the most prominent. In 2018, India's primary energy consumption was dominated by coal, which accounted for 45.88% of the total. Coal is the most abundant fossil fuel in India, with the top 5 states in terms of gross reserves being Jharkhand, Odisha, Chhattisgarh, West Bengal, and Madhya Pradesh. India also has limited reserves of coking coal, used for steel production, and imports large quantities from Australia. Crude oil and petroleum products are another major fossil fuel resource in India, with the country being the fourth-largest consumer and net importer in the world in 2013. Natural gas is also an important fossil fuel in India, with the country being the third-largest consumer and fourth-largest importer of liquefied natural gas (LNG) globally. India's energy policy is characterized by trade-offs between a rapidly growing economy, increasing household incomes, limited domestic reserves of fossil fuels, and the need to import a vast fraction of natural gas and crude oil, and more recently, coal.
| Characteristics | Values |
|---|---|
| Most abundant fossil fuel | Coal |
| Share of energy consumption by coal | 45.88% (2018) |
| Share of energy consumption by crude oil | 29.55% (2018) |
| Share of energy consumption by natural gas | 6.17% (2018); 6% (2019) |
| Share of energy consumption by nuclear energy | 1.09% (2018) |
| Share of energy consumption by hydroelectricity | 3.91% (2018) |
| Share of energy consumption by renewable power | 3.40% (2018); 25.44% (2022-23) |
| India's rank in world energy consumption | 3rd (2011, 2018); 4th (2013) |
| India's rank in fossil fuel imports | 4th (2013) |
| India's rank in LNG imports | 3rd (2019); 4th (2023) |
| India's energy import dependence | 46.13% (2018); 53% (projected by 2030) |
| India's coal import dependency | 23% (2012) |
| India's oil import dependency | 71% (2012) |
| India's share of global CO2 emissions | 7% |
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What You'll Learn
India's fossil fuel imports
India has significant domestic fossil fuel resources, but production has not kept pace with demand, leading to increased imports. In 2013, India was the fourth-largest consumer and importer of crude oil and petroleum products, with a demand of nearly 3.7 million barrels per day, far exceeding its domestic production of around 1 million barrels per day. Insufficient investment in crude oil production has caused production growth to lag behind demand. As a result, India's net oil import dependency rose from 43% in 1990 to an estimated 71% in 2012. The Middle East, the Americas (mainly Venezuela), and Africa are the major sources of crude oil imports to India.
India also imports coal, with net coal import dependency rising from nearly 0% in 1990 to 23% in 2012. India sources thermal coal for power generation from Indonesia and South Africa, and imports coking coal from Australia for steel production. The country's cement and steel industries are significant coal consumers.
In addition to coal and crude oil, India imports natural gas, mainly in the form of liquefied natural gas (LNG). India began importing LNG in 2004 due to insufficient domestic production and infrastructure. In 2013, India was the fourth-largest LNG importer, accounting for nearly 6% of the global market. LNG imports from Qatar made up about 29% of India's consumption in 2012.
To reduce its dependence on fossil fuel imports, India is encouraging the development of renewable energy sources through financial incentives. The country aims to achieve 500GW of renewable energy by 2030 and plans for renewable sources to generate half of its power by that year. However, India's fossil fuel industry is expected to face competition from renewable energy sources, and climate action will likely influence the country's dependency on fossil fuels.
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Coal production and consumption
India's energy demand is growing rapidly due to its dynamic economic growth, modernisation, urbanisation, and increasing household incomes. Coal is the most abundantly available fossil fuel in India and accounted for 45.88% of the country's total primary energy consumption in 2018. Coal production, however, has not been able to keep pace with demand, and India has increasingly turned to imports to meet its coal needs. In 2012, India's net coal import dependency was nearly 23%. The country imports thermal coal for power generation from Indonesia and South Africa, and coking coal from Australia for steel production.
Coal consumption in India is dominated by power plants generating electricity, with coal accounting for 55% of the country's electricity needs. The steel and cement industries are also significant coal consumers. India's manufacturing legacy was based on indigenous coal, and industrial primary energy use in the country has risen by around 700% over the last four decades.
The Indian government has set ambitious renewable energy targets and aims to generate half of the country's power from renewable sources by 2030. However, the transition from coal to renewables will take time, and India will continue to rely on natural gas and cleaner forms of fossil energy during this period. The government has launched initiatives such as the National Electric Mobility Mission and the National Hydrogen Mission to reduce greenhouse gas emissions and dependence on fossil fuels.
Despite the push for renewables, India's dependence on fossil fuel imports is expected to increase. By 2030, India's dependence on energy imports is projected to exceed 53% of its total energy consumption. This is due to insufficient investment in developing domestic crude oil and liquids production, which has caused production to grow at a slower rate than oil demand. India's petroleum product demand reached nearly 3.7 million barrels per day in 2013, far above the country's production capacity of around 1 million barrels per day.
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Oil and natural gas usage
India's fossil fuel industry is dominated by coal, but oil and natural gas are also important. In 2018, India's primary energy consumption included 29.55% crude oil and 6.17% natural gas.
India's oil and gas sector has seen substantial investment and exploration success under the New Exploration Licensing Policy (NELP) and Open Acreage Licensing Policy (OALP). Before 2014, nine NELP bid rounds attracted over $36 billion in investment, yielding 177 oil and gas discoveries.
India's oil consumption is forecast to rise from 4.05 million barrels per day (mbpd) in 2022 to 7.2 mbpd in 2030 and 9.2 mbpd in 2050. In 2013, India was the fourth-largest consumer and net importer of crude oil and petroleum products in the world. India's petroleum product demand reached nearly 3.7 million barrels per day, far above the country's roughly 1 million barrels per day of total liquids production. Most of India's demand is for motor gasoline and gasoil, used mainly in the transportation and industrial sectors.
India's natural gas consumption is projected to grow by nearly 60% by 2030, reaching 297 million standard cubic metres per day (mmscmd), up from 188 mmscmd in 2024. India's dependence on imported fossil fuels rose to 38% in 2012, and the country's net oil import dependency rose from 43% in 1990 to an estimated 71% in 2012. India imports 82% of its oil needs and aims to bring that down to 67% by increasing local hydrocarbon exploration, renewable energy, and indigenous ethanol fuel.
India's domestic crude oil and natural gas production have declined steadily since 2011-12. Production of crude oil and natural gas declined by a compound annual growth rate (CAGR) of 2.44% and 5.47% respectively over the previous decade. However, India's oil recovery rate is only 30-35%, while state-of-the-art technology can double it. India has planned to produce 15 million metric tons per year of compressed biogas (CBG), a carbon-neutral fuel, by 2023.
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Transition to renewable energy sources
India's fossil fuel resources include coal, crude oil, and natural gas. In 2018, India's primary energy consumption comprised coal (45.88%), crude oil (29.55%), and natural gas (6.17%). India has limited fossil fuel reserves and is increasingly dependent on imports to meet its energy demands. In 2012, India's net import dependency for coal and crude oil was 23% and 71%, respectively.
However, India is actively transitioning to renewable energy sources. The country aims to achieve net-zero emissions by 2070 and generate 50% of its electricity from renewable sources by 2030. This target has been increased to 500 GW of renewable energy capacity by 2030, which includes solar, wind, and hydroelectric power. India has already made significant progress by scaling up its renewable energy capacity by 250% between 2014 and 2021 and now ranks fourth in renewable energy capacity globally.
To achieve its renewable energy targets, India has implemented various measures, including financial incentives, transmission system charge waivers for interstate renewable power sales, renewable power purchase obligations, and the development of Ultra Mega Renewable Energy Parks. The government is also supporting domestic manufacturing through Production-Linked Incentive (PLI) schemes and establishing innovative green energy trading platforms.
The transition to renewable energy in India offers multiple benefits, including job creation, enhanced energy security, and reduced greenhouse gas emissions. Additionally, India has the potential to become a global leader in renewable batteries and green hydrogen, creating a market worth up to $80 billion by 2030.
While India is making significant strides in its energy transition, there are challenges to address. Fossil fuels remain more affordable than renewables, and there are economic vulnerabilities for communities reliant on fossil fuel supply chains. However, governments can play a crucial role in making renewables more viable by investing in the sector and promoting circular energy economies.
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Government policies and initiatives
India's strategy to encourage the development of renewable energy sources involves offering financial incentives from federal and state governments. The government has committed to achieving 50% of its installed electric power capacity from non-fossil sources by 2030, energy independence by 2047, and net-zero emissions by 2070. To this end, India has initiated viability gap funding (VGF) of USD 893 million for offshore wind energy projects, signalling its commitment to diversifying and strengthening its renewable energy mix. The government has also announced initiatives to promote emerging sectors such as green hydrogen, battery storage, and offshore wind.
Despite these initiatives, India's fossil fuel subsidies have been increasing. In FY 2022–23, fossil fuel subsidies were five times the subsidies for clean energy. In response to the COVID-19 pandemic, India committed at least USD 37.89 billion for unconditional fossil fuels through 29 policies and at least USD 8.17 billion for conditional fossil fuels through seven policies. This can be attributed to the need to support businesses and households during the cost-of-living crisis. However, these subsidies are inefficient at supporting low-income households and delay the transition to cleaner energy alternatives.
India has acknowledged the need to reduce its dependence on coal, but its rapidly growing economy and increasing energy requirements have led to a renewed reliance on this fossil fuel. The government has introduced a High-Price Day Ahead Market (HP-DAM) to support the uptake of expensive imported gas-based electricity, allowing electricity to be traded at a higher tariff. Additionally, the government has taken initiatives to support the expected import growth through the expansion of LNG terminals and infrastructure development.
To curb their carbon footprint, major Indian companies are exploring and implementing CCUS technologies, with support from both government and private sector investments. However, the commercialisation of CCUS by 2050 will require significant R&D incentives and international financial support. India has also committed to replacing the present consumption of fossil fuels with renewable and carbon-neutral biomass resources, making biomass mandatory in all coal-fired plants from October 2022.
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Frequently asked questions
India's fossil fuel resources include coal, crude oil, natural gas, and petroleum products.
Coal is the most abundantly available fossil fuel in India, accounting for 55% of the country's electricity needs.
In 2018, India's total primary energy consumption from fossil fuels was 809.2 Mtoe, excluding traditional biomass use. This included coal (45.88%), crude oil (29.55%), and natural gas (6.17%).
In 2022-23, 25.44% of India's total electricity production was from non-fossil fuel sources. In May 2023, this figure was 22.45%.
India's dependence on fossil fuels is expected to decrease in the future due to the increasing availability and affordability of renewable energy sources, such as solar and wind power. The Indian government has also introduced initiatives to reduce greenhouse gas emissions and dependence on fossil fuels. However, India will likely continue to rely on natural gas and cleaner forms of fossil energy during the transition to renewable energy.
