E-Paper
From energy vulnerability to sovereignty
This article is authored by Adil Zainulbhai, Amit Chandra and Anjali Bansal.
The Strait of Hormuz, a narrow 33-km stretch of water, has once again sent tremors through the global economy. For India, this is not just a geopolitical headline; it is a direct economic shock. Tensions in West Asia have pushed up our energy and fertiliser bills, weakened the rupee, and rattled the portfolios of tens of millions. As this drags on, the impact will be felt across businesses and in most households.
We have seen this movie before, in 1990, 2008, 2022, and now again. Each crisis exposes the same structural vulnerability: India’s dependence on imported fossil fuels. While every shock triggers some response, the underlying exposure remains. Next time must be different and for that, we must act now.
Consider the scale of the problem. India transfers over $150 billion+ abroad every year. This is not for productive asset creation, but simply to keep our lights on, our machines running, and vehicles moving. Every $10 rise in oil prices widens the current account deficit by about 30 basis points and trims GDP growth by 0.3%. This is a recurring macroeconomic shock that exports national income and constrains strategic autonomy. The case for change is no longer just environmental. It’s a strategic issue that affects our economy, stability and security.
While this dependence in such times exposes a key vulnerability; it also points to one of India’s largest economic opportunities. A large part of our fossil fuel related import bill represents over $150 billion+ in domestic value waiting to be captured. Capturing that can create huge local wealth and alter our macroeconomic framework. The building blocks already exist via many templates. In Gujarat, the Banas-Suzuki Biogas plant processes cattle waste into clean fuel for hundreds of vehicles while supplying organic fertiliser to farmers at a fraction of the cost of imported chemicals. In Punjab, the Verbio plant in Sangrur converts paddy stubble, once burned in fields, into city gas. In Uttar Pradesh, HPCL’s Badaun plant transforms agricultural residue into clean energy alongside nutrient-rich manure.
These are not pilots. They are working models of a circular economy: waste becomes fuel, fuel replaces imports, and byproducts enrich the soil. Scale them, and three outcomes follow simultaneously lower imports, higher rural incomes, and cleaner air. Add to this the momentum in solar and wind, and what emerges is the template for one of the largest industrial opportunities of the next decade.
India has demonstrated that it can execute at scale. Solar capacity has grown more than forty-fold in a decade. As of 2026, India has reached 283 GW of non-fossil installed capacity, with clean sources accounting for over 50% of installed power capacity. The ethanol blending program achieved E20 in 2025, saving over ₹1 lakh crore in foreign exchange. These are proof points of execution capability. But survival is not sovereignty. Our approach must now shift to a sustained, mission-mode hyper scale effort. What India needs to aim for is energy sovereignty as a long-term national priority – one that will be insulated from short-term price cycles.
History offers some clear lessons on such examples. After the 1973 oil shock, France rapidly built scale nuclear capacity. Similarly, Denmark completely rewired its grid around wind. China made a two-decade bet on clean energy that now underpins its global leadership in solar manufacturing and electric mobility. The lesson is that transformation follows well executed and stable long-term policy frameworks.
India’s need of the hour is sharper focus across five priorities.
- Solar plus storage: India is a global solar leader, but generation alone is not enough. Without storage, solar remains intermittent. Every new renewable tender must integrate grid connectivity and battery storage. GST on storage systems should be reduced, and grid infrastructure strengthened and treated as critical national infrastructure.
- Nuclear: Solar powers the day; nuclear must power the night. As demand for reliable, round-the-clock electricity rises from manufacturing to AI data centres, nuclear offers a proven clean solution. India’s ambition of 100 GW by 2047 should be treated as a floor. Small Modular Reactors and long-term thorium development can accelerate this pathway.
- Biofuels and CBG: India generates over 500 million tonnes of agricultural biomass annually, much of it burned or underutilised. Scaling compressed biogas and second-generation ethanol can convert waste into energy and fertiliser cutting imports, raising rural incomes, and improving air quality. Building on the E20 milestone achieved in 2025, a further transition to E27.5 presents a pragmatic next step, one that demands only modest modifications to existing ICEE platforms. The gains are tangible: an additional $1.5 billion in annual import savings, and roughly ₹18,000 crore in incremental income flowing directly to farmers each year.
- Mobility: Transport accounts for around a third of our crude consumption. A clear roadmap is needed: combining electric vehicles for urban mobility, with CNG and flex-fuels for commercial use. Policy architecture that largely exists needs some tweaking with execution at scale is the next step.
- LPG substitution: India remains dependent on large volumes of imported LPG. The next phase of the Ujjwala story must focus on reducing this dependence through expansion of piped natural gas and promotion of electric cooking solutions.
The greatest risk to this transition is not technology but maintaining consistency amidst volatility. When global oil prices fall, urgency is bound to fade, and investments slow. This “price trap” has often derailed energy transitions worldwide. India must avoid it. Energy sovereignty must become a cycle-proof national commitment. This requires a whole-of-society approach, tracking import dependence alongside growth and inflation and sustaining investment through both price spikes and troughs.
India cannot control geopolitics or global oil prices. But it can control how exposed it remains. The next disruption is not a question of if, but when. What we do now with urgency and imagination will determine our economic resilience, strategic autonomy, and long-term growth. The goal must be simple: Atmanirbharta in energy, building wealth at home instead of transferring it abroad. That is how India can finally break out of this recurring cycle and turn crisis into enduring national advantage.
(The views expressed are personal)
This article is authored by Adil Zainulbhai, former managing director, Mckinsey India, Amit Chandra, chairperson, Bain Capital India and Anjali Bansal, founding partner, Avaana Capital.
