By Dhanendra Kumar, Chairman, Competition Advisory Services India LLP (COMPAD)
On August 6, US President Donald Trump signed an executive order adding a 25% tariff (beyond an earlier 25% imposed in July) on certain Indian imports because New Delhi continues to buy discounted Russian crude, raising the effective rate to 50%. The ministry of external affairs described the actions as “unfair, unjustified and unreasonable”, and “extremely unfortunate”. The White House order explicitly linked the measure to India’s purchases of Russian oil. Markets have already begun pricing the geopolitical risk, and Indian exporters, of goods from leather to light engineering, are bracing for the additional bazooka. For an economy that imports the bulk of its crude, the tariff lands squarely on the country’s energy security.
This comes at a time when India’s energy appetite is expected to grow rapidly, driven by industrialisation and urbanisation; in fact the needs are existential. The ministry of statistics reported that in FY24, crude oil imports rose to 234.26 million tonnes. Import dependence remained high at around 89% for crude oil and 25.86% for coal, according to the ministry of petroleum and natural gas.
A domestic push linked to structural reform
India’s long-term resilience depends on how effectively it develops its own reserves. As of April 2024, the country’s crude oil reserves stood at 671.40 million tonnes, but production in FY24 was just 29.36 million tonnes. This mismatch in the new urgency underscores the need for quick action. Ageing fields and a reliance on public sector undertakings highlight why a stronger role for private players is needed.
Private explorers, with global capital and advanced drilling technologies, are best placed to unlock frontier basins, deep-water prospects, and unconventional plays. Take the example of Guyana, where Chevron and Hess made significant new discoveries. Similarly, the recent discovery by British Petroleum in Brazil is said to be the largest in 25 years.
India’s backbone remains its national oil companies: about 77% of crude is produced by ONGC and OIL under the nomination regime. ONGC’s operating discipline in mature Western offshore and onshore clusters reflects base output and national energy resilience. In the post-crude-sale deregulation, ONGC can continue to focus on its role without legacy bottlenecks.
Reforms & private sector push
Cairn Oil & Gas, Vedanta’s upstream arm, represents the private sector’s potential. As India’s largest private producer with ~73,000 sq km of acreage, it operates major fields in Rajasthan and has announced a `50,000-crore investment in Assam along with commitments in other basins and deep-water exploration. Its proposed demerger into a pure-play upstream company offers a chance to link the domestic production push with corporate restructuring. By separating from Vedanta Ltd, Cairn would gain agility, attract fresh investment, and sharpen its focus on exploration and output growth.
The domestic production challenge and the Cairn demerger are two sides of the same coin: one meets the macro need for more energy, the other provides a structural pathway to achieve it. For the government, including the petroleum ministry, a stronger, focused producer not only enhances energy security but also boosts revenues and jobs. For investors, the timely completion of the demerger unlocks value and reduces uncertainty. Yet despite overwhelming shareholder approval, procedural uncertainties have slowed the progress of the demerger. Objections raised in such cases delay corporate restructuring, reduce the pace of wealth creation, and close off opportunities for growth.
A more agile and well-capitalised upstream sector would ultimately benefit investors, the petroleum ministry, and the exchequer alike. With consumption consistently outpacing domestic output, external shocks, tariffs, price-cap frictions, or shipping constraints can send ripples across the economy. This makes the case for a stronger domestic push clear: every incremental barrel produced in India reduces foreign risk and improves macro stability.
Govt policy measures
Over the past decade, policy reforms have sought to re-energise exploration and production (E&P). The Hydrocarbon Exploration and Licensing Policy (HELP, 2016), Open Acreage Licensing (2017), and creation of the National Data Repository have broadened participation. Monetisation of coal-bed methane, incentives for enhanced recovery, and crude sale deregulation in 2022 have also added flexibility. These measures create a foundation, but their effectiveness ultimately depends on how well private and public players are allowed to expand output.
Learning from abroad
The US offers lessons. Policies such as expanding offshore lease sales and accelerating approvals have been controversial, but they underline a consistent effort to ensure supply and reduce import vulnerability. The “drill, baby, drill” rhetoric may look political shorthand, yet the underlying principle—reducing barriers and enabling producers—is the need of the hour.
India may not mimic this approach, but it can take cues in shaping a pragmatic model, one that provides clearances in a predictable time frame, balances environmental oversight, and creates confidence for long-term investors. In such a framework, both policy reforms and corporate restructuring can play a role in moving the country closer to energy self-reliance.