India’s energy balancing act

India’s growth story hinges on managing its energy transition while balancing development needs with long-term climate ambition.

In brief

• India’s evolving energy mix reflects a pragmatic approach, where fossil fuels and renewable energy scale simultaneously to support economic expansion and energy access.
• Structural shifts across mobility, refining and fuels highlight India’s pursuit of energy security amid rising demand and geopolitical uncertainty.
• The coming decade will be defined by India's dual energy architecture, where policy, infrastructure, and innovation must align to meet development goals and net zero targets..

India has pledged to achieve net zero targets by 2070 and energy independence by 2047. As the world’s fourth-largest economy, with a GDP touching US$4.1 trillion, and notable advancements in clean energy, the country faces a complex energy transition as economic growth and development needs continue to drive consumption of fossil fuels. Oil demand is projected to rise from 5 to 5.5 million barrels per day (mbpd) in 2023–24 to roughly 9 mbpd by 2050, while coal is expected to remain a major, likely more than 40%, of India’s primary energy mix in 2050, based on the current trajectory.

With oil and coal consumption and production expected to climb sharply, India’s continued reliance on traditional energy sources highlights a key challenge at the heart of India’s energy balancing act: achieving the right equilibrium between fossil fuels and renewable energy. Alternatives such as green hydrogen and other clean fuels are beginning to make an impact; however, they have not yet reached commercially viable scales or costs to effectively replace fossil fuels across the economy.

This dynamic has given rise to five powerful trends that define the underlying dynamics of India’s evolving energy mix, as well as the challenges ahead.

Decarbonization paradox

Despite record renewable installations, falling solar costs and policy support under India’s evolving energy policy framework, dependence on coal has deepened, while natural gas consumption has remained largely flat.

In FY2024–25, India crossed a historic threshold by producing more than one billion tonnes of coal, rising at a five-year CAGR of 7.5%, with over 243 million tonnes of additional volume coming from imports. This underscores how strongly the system continues to rely on domestic supply to fuel power generation and industry. The simultaneous expansion of clean capacity and the fossil base clearly illustrates India’s decarbonization paradox, where decarbonization ambitions coexist with rising absolute fossil fuel volumes.

Mobility and transport fuel surge

India’s transport sector reflects a gradual but meaningful transition toward clean mobility fuels. With 5.7 million EVs on the road and CNG networks expanding from 8,400 stations in September 2025 to 18,000 by 2034, the country is laying the foundation for cleaner mobility while supporting economic growth.

At the same time, petrol consumption reached approximately 40 MMT in 2024–25 (CAGR of 9%) due to increased personal vehicle and two-wheeler ownership. Diesel demand is projected to rise to 110–120 MMT by 2030–31 as logistics and freight activity expand.

The ethanol blending program has been a game changer, with blending rising exponentially to reach 20% in July 2025. While the program advances affordability, energy security, environmental sustainability and social outcomes, it also raises considerations around vehicle life, mileage and sustainable agricultural practices.

Refineries stretch capacity to new limits

India’s refining industry is undergoing a significant transformation, stretching capacity, integrating with petrochemicals and adapting to evolving fuel demand. Utilization rates reached 109% of nameplate capacity by FY2024–25, while refining capacity is expected to grow from 258 MMTPA in 2025 to 310 MMTPA by 2030–31.

The production mix is also shifting. Petrol production grew at about 7.7% CAGR to approximately 48 MMT by 2024–25, while ATF production has more than doubled since 2020–21. In contrast, naphtha production declined from approximately 19.4 MMT in 2020–21 to around 18 MMT in 2024–25, as the power, fertilizer and textile sectors increasingly prefer cheaper alternatives such as natural gas and LPG.

High utilization rates, capacity expansions and deeper refinery–petrochemical integration reinforce the role of the refining industry as a flexible backbone of the oil and gas sector, supporting current fossil-fuel demand while preparing for a future where bio-blends, gas, petrochemicals and cleaner fuels play a larger role.

Import dependency and geopolitical vulnerability

India’s energy import dependency continues to pose strategic risks. The country imported 242 MT of crude oil in FY2024–25 against domestic production of just 29 MT, highlighting heavy reliance on external supplies amid volatile geopolitics. Crude oil import bills over the past two fiscal years have remained in the range of approximately US$133 billion to US$137 billion.

Natural gas imports reached 36.7 billion cubic meters in FY25, nearly matching domestic output of 35.6 billion cubic meters. India also imports around 60% of its LPG requirements, with domestic production of approximately 12.5 MMT struggling to keep pace with rising household consumption.

In an increasingly uncertain global energy environment, strengthening domestic exploration and production will be critical to enhancing energy security and reducing exposure to external shocks.