India’s Conventional Energy Landscape: Challenges and Opportunities

India is one of the world’s fastest-growing energy consumers, and the story of how it powers itself is a study in scale, dependency, and ambition. With a population exceeding 1.4 billion and an economy expanding at roughly 7% annually, the country’s hunger for energy is enormous – and for now, the vast majority of that hunger is fed by conventional fossil fuels. Understanding how coal, oil, and natural gas currently shape India’s energy landscape, and what the country is doing to manage the risks that come with that dependence, is key to understanding one of the most consequential energy transitions happening anywhere in the world today.

The dominance of coal in India’s energy mix
Oil dependence and the import burden
Natural gas: a smaller but growing role
Renewable energy potential vs. the fossil fuel reality
Policy and infrastructure for energy security
Building a gas-based economy
Nuclear energy: promise and challenges
Coal gasification and upstream reforms
The road ahead: balancing growth with sustainability

The dominance of coal in India’s energy mix

Coal is the undisputed foundation of India’s energy system. According to the Ministry of Coal, coal accounts for approximately 57.6% of India’s total energy production, making it far and away the most dominant source. In electricity generation specifically, the picture is even starker – coal supplied nearly 75% of India’s electricity in 2023, and the government has acknowledged this dependence will persist well into the next decade, with coal consumption expected to peak only between 2030 and 2035.

India holds the world’s fifth-largest coal reserves, concentrated primarily in the Damodar Valley belt spanning Jharkhand and West Bengal (Gondwana coalfields), as well as in states like Odisha, Chhattisgarh, and Madhya Pradesh. India’s coal production reached 1.09 billion tonnes in 2024-25, a 5% increase over the previous year. The bulk of this coal is low-grade, non-coking bituminous coal – suitable for power generation but not for steel manufacturing, which means India must still import coking coal for its iron and steel industry. In 2021-22, India imported nearly 90% of its coking coal requirements.

Despite large domestic reserves, India’s coal is predominantly low-rank and not well-suited for industrial applications beyond power. This structural gap – abundant coal that can only do so much – is one of the central ironies of India’s conventional energy situation.

Oil dependence and the import burden

India’s relationship with petroleum is defined by a significant and widening gap between domestic production and national consumption. Oil contributes around 28% of India’s total energy requirements, primarily for transportation and industry. But domestic production covers only a fraction of this need. During FY 2024-25, India’s domestic crude oil output was just 28.7 million metric tonnes – roughly 12% of total oil requirement – while consumption has grown 47% over the last decade even as production has fallen by 22%.

This leaves India heavily exposed to global oil markets. The country is the world’s fourth-largest oil consumer and, critically, one of the largest importers. Major petroleum reserves do exist domestically – Mumbai High and Bassein offshore fields in Maharashtra, the Assam fields around Digboi and Naharkatiya, and blocks in the Krishna-Godavari basin – but production from these aging fields has declined steadily. India’s Strategic Petroleum Reserve (SPR), managed by the Indian Strategic Petroleum Reserves Limited (ISPRL), maintains underground storage facilities at Visakhapatnam, Mangalore, and Padur as a buffer against supply disruptions. Additional reserves are planned at Chandikhole in Odisha and Bikaner in Rajasthan.

The economic implications of import dependence are significant. India’s oil import bill runs into hundreds of billions of dollars annually, making it vulnerable to crude price volatility. One notable recent development was India’s sharp increase in discounted Russian crude purchases following the 2022 Ukraine conflict – a pragmatic move that reduced average import costs but also raised geopolitical questions about supply diversification.

Natural gas: a smaller but growing role

Natural gas accounts for nearly 7% of India’s primary energy mix, used mainly in fertilizer production, power generation, and city gas distribution for cooking and transport. The country has domestic reserves in the Krishna-Godavari (KG) Basin, Assam, the Gulf of Cambay, and smaller fields in Rajasthan and Tamil Nadu. However, India imports around 50% of its natural gas requirements, primarily as Liquefied Natural Gas (LNG), with Qatar and the UAE as the largest suppliers.

India has set an ambitious target of raising natural gas’s share in its energy mix from 7% to 15% by 2030. To support this goal, the natural gas pipeline network has been expanding rapidly – the operational gas pipeline network has grown to over 25,400 km, with an additional 10,459 km under construction – as part of the “One Nation, One Grid, One Tariff” vision. Eight LNG import terminals are currently operational, and capacity is targeted to rise to over 66 million tonnes per annum (MTPA) by 2030. Long-term LNG supply agreements have also been signed with ADNOC (UAE) to ensure stable volumes. Still, as recent global LNG price spikes demonstrated after the Russia-Ukraine war, gas-based power generation in India remains price-sensitive and vulnerable to international market shocks.

Renewable energy potential vs. the fossil fuel reality

India has made genuinely impressive strides in renewable energy. In 2024-25, India added a record 29.5 GW of renewable capacity – a 59% jump – led by 23.8 GW of solar installations. Renewables now account for 43% of total installed power capacity. The government has set a target of 500 GW of non-fossil fuel capacity by 2030, in line with India’s updated Nationally Determined Contribution (NDC) under the Paris Agreement.

And yet, installed capacity and actual electricity generation are two different things. Renewable sources like solar and wind are intermittent – they don’t produce power around the clock. Coal, by contrast, provides reliable baseload power. Renewables accounted for 89% of new capacity additions in FY 2024-25, but coal still dominates actual generation. The government acknowledged this tension in its National Electricity Plan (2022-2032), which envisions non-fossil-based capacity reaching 68.4% by 2031-32 while simultaneously planning for coal power to expand from 210 GW in 2025 to over 300 GW by 2035.

India’s electricity demand is projected to nearly double by 2030, reaching around 2,500 TWh. Against this backdrop, the challenge is not just building more renewable capacity – it is building enough storage, grid infrastructure, and dispatchable backup generation to make that capacity reliable. Estimates suggest India needs over $250 billion in annual clean energy investment, but actual investment reached only $60 billion in 2022, pointing to a significant financing gap that cannot be bridged by public funds alone.

Policy and infrastructure for energy security

India’s response to these energy challenges has been multi-pronged, combining diversification of fuel sources, infrastructure expansion, and a longer-term bet on nuclear power.

Building a gas-based economy

The Ministry of Petroleum and Natural Gas has outlined a clear strategy to shift India toward a gas-based economy. Indian PSUs IOCL and GAIL executed long-term LNG agreements with ADNOC in FY 2023-24, securing approximately 2.7 million metric tonnes annually. The Unified Pipeline Tariff (UPT), introduced in 2023 and now covering 90% of operational pipelines, standardizes gas transportation costs across the country – removing regional price disparities that previously limited gas adoption. City Gas Distribution (CGD) networks now cover all geographical areas across India, with CNG stations increasing from about 968 in 2014 to over 8,477, and PNG household connections rising to over 1.59 crore.

Nuclear energy: promise and challenges

Nuclear energy currently contributes just 3% of India’s electricity generation, with 22 operational reactors and an installed capacity of around 7.48 GW. But India has articulated serious ambitions to change this. India aims to triple its nuclear capacity to approximately 22,480 MW by 2031, and has set a long-term target of 100 GW of nuclear capacity by 2047 as part of the Viksit Bharat vision. India’s three-stage nuclear program – which involves Pressurized Heavy Water Reactors in the first stage, Fast Breeder Reactors in the second, and eventually thorium-based reactors in the third – is designed to leverage India’s vast thorium reserves (estimated at 846,000 tonnes), one of the largest in the world.

To accelerate this, India’s 2024 Union Budget announced support for Bharat Small Reactors (BSRs) – small modular reactors based on indigenous technology, with at least five 220 MWe units targeted to be operational by 2033. Collaboration between NPCIL and NTPC has also been initiated to build new nuclear complexes in Madhya Pradesh and Rajasthan. However, the Civil Liability for Nuclear Damage Act (CLNDA) continues to deter foreign investment and private sector participation – a legislative reform widely seen as necessary before India can fully realize its nuclear ambitions.

Coal gasification and upstream reforms

India is also investing in technologies to extract more value from its existing coal reserves. Two coal gasification projects have been approved – one for synthetic natural gas and one for ammonium nitrate – alongside a pilot project for underground coal gasification that began in June 2024. India plans to gasify 100 million tonnes of coal by 2030, potentially converting a low-grade domestic resource into a more versatile fuel. On the upstream oil and gas side, the Oilfield (Regulation and Development) Amendment Act, 2025, and the new Petroleum and Natural Gas Rules, 2025, modernize the regulatory framework to attract greater private and foreign investment in exploration.

The road ahead: balancing growth with sustainability

India’s conventional energy picture is one of clear tensions. The country needs affordable, reliable energy to sustain economic growth and lift hundreds of millions out of energy poverty – and coal, oil, and gas continue to deliver that in ways that intermittent renewables alone cannot yet match. At the same time, burning fossil fuels drives greenhouse gas emissions and air pollution, both of which carry severe costs for public health and climate commitments. India has reduced the emission intensity of its GDP by 36% from 2005 to 2020, and is targeting a 45% reduction by 2030 – meaningful progress, but the absolute scale of energy demand growth means total emissions are still rising.

The path India is carving – expanding renewables aggressively, building gas infrastructure, pushing nuclear forward, and continuing to extract maximum value from coal while phasing it down – reflects a country that cannot afford idealism but is clearly moving in a structural direction. The decisions made over the next decade on coal plant retirements, LNG import strategy, nuclear legislation, and clean energy financing will shape not just India’s energy future, but the global energy transition itself.

What do you think? As India tries to balance affordable energy for a growing economy with its climate commitments, should it prioritize faster coal phase-out even if that risks energy shortfalls – or is a gradual transition the more responsible approach? And given the scale of investment required, do you think public funding alone can drive India’s clean energy goals, or is private sector participation truly unavoidable?

References

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Table of Contents

The dominance of coal in India’s energy mix 🔗

Oil dependence and the import burden 🔗

Natural gas: a smaller but growing role 🔗

Renewable energy potential vs. the fossil fuel reality 🔗

Policy and infrastructure for energy security 🔗

Building a gas-based economy 🔗

Nuclear energy: promise and challenges 🔗

Coal gasification and upstream reforms 🔗

The road ahead: balancing growth with sustainability 🔗