In an era of geopolitical volatility, India’s states must move from managing transition to architecting a more secure and self-reliant energy future
Tensions around the Strait of Hormuz should give India reason to be wary, not episodically, but structurally. The scale of India’s exposure is stark. The country imports nearly 90 percent of its crude oil and over half of its natural gas, with roughly 40–50 percent of these flows moving through this narrow maritime corridor. A US$10 increase in oil prices typically widens India’s current account deficit by about 0.3–0.4 percent of GDP, feeding into inflationary pressures that ripple across households, industry and public finances. Even short-lived disruptions force emergency responses such as rerouting cargoes, drawing on reserves, and prioritising essential supplies like LPG. These are coping mechanisms. They are not solutions.
In a world of recurring geopolitical shocks, the more fundamental question is unavoidable: how can India build a more secure energy future?
The answer lies not only in what India imports, but in how it produces, distributes, and consumes energy at home. The deeper vulnerability is embedded in the structure of the energy system itself. Electricity today accounts for less than 20 percent of final energy consumption, while oil continues to dominate transport, and a large share of cooking energy remains import-dependent. Coal still supplies close to 70–75 percent of electricity generation, even as non-fossil sources have crossed 50 percent of installed power capacity. India is, in effect, transitioning without yet becoming secure.
A US$10 increase in oil prices typically widens India’s current account deficit by about 0.3–0.4 percent of GDP, feeding into inflationary pressures that ripple across households, industry and public finances. Even short-lived disruptions force emergency responses such as rerouting cargoes, drawing on reserves, and prioritising essential supplies like LPG.
The instinctive responses, such as diversifying import sources, building strategic reserves, and securing shipping routes, while necessary, however, do not reduce exposure to a world where energy flows are shaped as much by conflict as by markets. What is required is a domestic strategy that builds resilience into the system itself. That strategy cannot be delivered from the top alone. It must be built from the ground up.
India’s states already shape the country’s energy trajectory through their control over electricity distribution, urban planning, transport systems, and industrial policy. Yet, their role in energy security remains under-leveraged. A handful of states account for a disproportionate share of renewable capacity, while coal-dependent regions remain tied to legacy systems. This unevenness is no longer just a developmental imbalance. It is a strategic risk.
If India is to build energy security in a disrupted world, states must move from being participants in the transition to becoming its architects. Three shifts, led at the subnational level, can begin to close the gap between transition and security.
The first is the rapid electrification of end-use sectors. Electricity today accounts for under a fifth of India’s energy mix, compared to over 30 percent in many advanced economies. Raising this share to 35–40 percent by 2035 would significantly reduce dependence on imported fuels. The opportunity lies in sectors where alternatives are already within reach. Transport alone consumes over 40 percent of India’s oil; accelerating electric mobility through state-led procurement of buses, fleet electrification mandates, and charging infrastructure can directly cut import dependence. Similarly, India imports over 60 percent of its LPG consumption. Expanding electric cooking, particularly in rural areas, can insulate households from supply disruptions that translate quickly into welfare shocks.
A handful of states account for a disproportionate share of renewable capacity, while coal-dependent regions remain tied to legacy systems. This unevenness is no longer just a developmental imbalance. It is a strategic risk.
The policy direction must therefore be unambiguous. States should treat electrification not as a climate add-on but as a core energy security strategy. This means mandating electric public transport fleets in major cities, linking rural energy access programmes with solar-powered electric cooking solutions, and rationalising tariffs to make electricity the preferred energy carrier. With solar tariffs falling below INR 2.5 per unit in several states and storage costs declining steadily, the economic case for electrification is now aligned with the strategic one.
The second shift is towards distributed and decentralised energy systems. India’s renewable expansion has been driven largely by utility-scale projects, which, while necessary, have reinforced centralised grid dependencies and required significant transmission investments. Yet, there is an opportunity to add over 100 GW of decentralised renewable capacity by 2030 through rooftop solar, agricultural feeders, and localised systems.
Programmes such as KUSUM and rooftop solar initiatives in states like Maharashtra, Gujarat, and Madhya Pradesh demonstrate that decentralised systems can scale. These systems reduce transmission losses, lower infrastructure costs, and bring generation closer to consumption. More importantly, they create resilience. A decentralised system with multiple generation nodes is less vulnerable to systemic disruption than one dependent on centralised supply chains.
States should treat electrification not as a climate add-on but as a core energy security strategy. This means mandating electric public transport fleets in major cities, linking rural energy access programmes with solar-powered electric cooking solutions, and rationalising tariffs to make electricity the preferred energy carrier.
The next step is to move from pilots to policy mandates. States should require rooftop solar integration in new urban construction, create distribution-level markets for decentralised generation, and integrate battery energy storage at the feeder level. Storage is the critical enabler. With battery costs having declined by nearly 80 percent over the past decade, decentralised renewable systems can now deliver reliable, round-the-clock power. This reduces dependence on imported LNG and coal for balancing and creates local energy buffers that can withstand external shocks.
The third shift is to bring coal-dependent states into the transition through a more pragmatic pathway. Coal remains central to India’s energy system, accounting for the bulk of electricity generation and supporting industrial ecosystems in several regions. A disorderly transition away from coal risks creating new vulnerabilities, economic, social and political.
A more calibrated approach lies in cleaner coal pathways. Technologies such as coal gasification and carbon capture, utilisation, and storage (CCUS) offer a way to maintain energy availability while reducing emissions intensity. India’s target of 100 million tonnes of coal gasification by 2030 signals the beginning of this shift. Making new thermal plants CCUS-ready can allow states to retain baseload capacity while aligning with longer-term climate goals.
States should require rooftop solar integration in new urban construction, create distribution-level markets for decentralised generation, and integrate battery energy storage at the feeder level.
The policy imperative is to align incentives with transition pathways. Coal-rich states must be supported to evolve into integrated energy hubs that combine cleaner coal technologies with renewables and storage. This will require targeted fiscal support, viability gap funding, and industrial policies that attract new investment into these regions. Without such alignment, the transition risks deepening regional disparities, with some states advancing while others remain exposed.
Taken together, these shifts redefine energy security. It is no longer about securing supply chains alone. It is about reducing dependence on those supply chains by reshaping demand, decentralising production, and managing transition pathways.
The Strait of Hormuz will remain a geopolitical flashpoint. India cannot control that. What it can control is the degree to which such disruptions affect its economy.
That will depend on whether its states act as passive recipients of national policy or as active builders of resilience. Electrification that displaces oil, decentralised systems that localise energy, and pragmatic transitions in coal-dependent regions together offer a pathway that is both realistic and urgent.
Aparna Roy is Fellow and Lead, Climate Change and Energy, at the Centre for New Economic Diplomacy, Observer Research Foundation.
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Aparna Roy is a Fellow and Lead Climate Change and Energy at the Centre for New Economic Diplomacy (CNED). Aparna's primary research focus is on ...
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