New Delhi – A draft trade agreement between India and the United States has sparked protests from farmers and labor unions across the country, centering on a U.S. Demand that India curtail its imports of discounted Russian oil. The proposed restrictions, intended to limit Russia’s revenue streams following its invasion of Ukraine, have exposed India’s growing reliance on imported energy and ignited a debate over the nation’s strategic autonomy.
India’s imports of Russian oil surged from 2% of its total oil imports in 2021 to 36% in 2024, driven by significant price differentials – at times reaching $35 per barrel below Brent crude. While the discount has narrowed to around $2 recently, leading to a corresponding decrease in Russian oil purchases, the issue has highlighted a broader vulnerability within the Indian economy, according to analysts.
Data indicates that India’s overall dependence on imported energy has risen steadily, from 10% of total energy consumption in 1990 to over 35% in 2023. This contrasts with China, which, despite also being energy dependent, has maintained a comparatively lower level of reliance at similar stages of economic development.
The increasing reliance on imports presents a strategic challenge for India as geopolitical factors increasingly influence trade dynamics. While increasing domestic hydrocarbon investment, mirroring the approach of the United States under the Trump administration, is one option, a shift towards a renewables-based energy system is gaining traction as a potentially more sustainable solution.
A transition to renewable energy sources, such as solar and wind power, offers several advantages. India possesses abundant solar and wind resources, and increased reliance on these sources could drive electrification across key sectors, including data centers, electric vehicles, and artificial intelligence. However, such a shift also carries the risk of creating a new dependence on technology, particularly given China’s dominance in solar manufacturing and battery supply chains – controlling over 80% of solar manufacturing.
Beyond energy security, a move away from fossil fuels could address severe pollution problems within India. A recent World Bank study highlighted the significant social costs associated with burning coal and oil, with cities like New Delhi facing hazardous air quality. Approximately $40-60 billion in existing thermal power investments are already considered stranded or at risk, as solar-plus-battery storage solutions become increasingly competitive.
Reviving India’s manufacturing sector is also seen as a key benefit of transitioning to cheaper, renewable electricity. A study, *A Sixth of Humanity: Independent India’s Development Odyssey*, points to electricity costs in India being double those of competitor countries, hindering manufacturing growth. In contrast, reforms in the telecommunications sector have fostered success, while a lack of similar reforms in the power sector has held back manufacturing.
Currently, electricity accounts for 15.6% of India’s total energy consumption, lower than China’s share at a comparable development stage (27.4% in 2009) and significantly lower than China’s current level. Similarly, renewables constitute 20% of India’s energy mix, compared to 35% in China. India’s renewable energy share has increased significantly, with 50 gigawatts of capacity added in 2025, and its green hydrogen auctions have attracted competitive bids.
Despite these commitments, significant structural and institutional challenges remain. Fragmentation of decision-making between the central government and the 28 state governments, particularly regarding the distribution sector, poses a major obstacle. Indian distribution companies (“discoms”), largely public-sector monopolies, are burdened with approximately $75 billion in debt, stemming from populist political pressures that keep electricity prices below cost.
This financial strain prevents discoms from purchasing power from renewable generators, resulting in over 50 GW of excess renewable energy supply. It also hinders investment in the necessary grid infrastructure and storage systems – estimated at $50 billion by 2035 – required to fully transition to an electro-state. Currently, inadequate transmission capacity impedes approximately 60 GW of power.
The central government is taking steps to address these issues, but bolder reforms, particularly at the state level, are crucial. Addressing the dominance of inefficient public-sector monopolies and fostering competition will be essential to facilitate the technological transition. The pace of reform will determine India’s vulnerability to shifting geopolitical dynamics in the energy sector.
