INDIA'S ENERGY SECURITY

Since the 1980s, the Gulf countries have been among India’s top petroleum suppliers. What are the factors that contribute to the continued significance of the Gulf region in India’s energy security?

2.Energy Consumption in India

• Currently, India ranks as the third-largest energy consumer globally, following China and the United States. The Statistical Review of World Energy for 2024 reports that India’s primary energy consumption reached 39.02 exajoules in 2023, representing 6.3 percent of the world's total energy use.
• For rapidly growing economies like India, ensuring a reliable energy supply for both industrial and domestic needs is crucial.
• This concept, known as energy security, encompasses having sufficient energy to meet internal needs and ensuring that the energy infrastructure, including power systems, is protected from potential threats.
• The Energy Statistics India 2024, issued by the National Statistical Office under the Ministry of Statistics and Programme Implementation, indicates that India’s primary energy production in 2022-23 was 19.55 exajoules, while the total consumption for the same period was 35.16 exajoules.
• This implies that approximately 68 percent of the country’s energy needs were fulfilled through domestic production, highlighting a notable reliance on external sources.
• Coal remains India’s principal source of primary energy, accounting for 58.12 percent of the total in 2023. Although India produced 16.75 exajoules of coal domestically in 2023, the country still needed to import part of its coal requirements due to a consumption of 21.98 exajoules during the same year

• The reliance on external sources is particularly pronounced in the case of oil and gas, which, according to the National Institution for Transforming India (NITI Aayog), constituted 35.44 percent of India’s primary energy supply in 2023.
• The Statistical Review of World Energy 2024 reveals that India’s oil consumption reached 5.44 million barrels per day in 2023, while its oil production was only 0.73 million barrels per day.
• Similarly, natural gas consumption was 62.6 billion cubic meters, compared to a production of just 31.6 billion cubic meters. This indicates a significant external dependency for both oil and gas, highlighting India’s reliance on imports to secure its energy needs, particularly for meeting the demands of these resources.
• This dependency is especially critical for the transportation sector, which relies heavily on oil and gas. Consequently, India’s transportation industry must rely substantially on petroleum imports to maintain its operations. The critical question then becomes the source of this essential petroleum supply

 

4.Dependency on Gulf Countries

 

• Historically, the Persian Gulf nations, including the six Gulf Cooperation Council (GCC) members—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE)—as well as Iran and Iraq, have been the main suppliers of oil and gas to India, accounting for approximately 55-60 percent of the country’s total oil and gas imports.
• Data from the Directorate General of Commercial Intelligence and Statistics, part of the Ministry of Commerce, shows that in 2023-24, five of these Gulf nations—specifically Iraq (second), Saudi Arabia (third), UAE (fourth), Qatar (seventh), and Kuwait (ninth)—were among the top ten petroleum suppliers to India. The other five positions were occupied by Russia (first), the United States (fifth), Australia (sixth), Indonesia (eighth), and Nigeria (tenth).
• The Gulf countries have consistently been leading petroleum suppliers to India since the 1980s, maintaining their role as reliable sources despite variations in the global oil and gas markets and supply chains

 

Significance of Continued Dependency on Gulf Countries

• In recent years, due to concerns about carbon emissions and fluctuations in the global oil and gas markets, India has actively sought to diversify its energy sources and petroleum imports.
• This shift has led to a greater emphasis on clean and renewable energy, while countries like Russia, the United States, Australia, and Nigeria have become significant suppliers.
• However, the Gulf region continues to play a crucial role in India’s energy security for several reasons. Its geographic proximity to India and well-established buyer-seller networks are major advantages.
• Additionally, Gulf states such as Saudi Arabia, the UAE, and Qatar offer oil and gas at favorable prices, which is advantageous amidst market volatility.
• Strong political and economic relationships, geopolitical considerations, and efficient transportation infrastructure further ensure a steady supply of energy from this region

5. Trade and Investment of Gulf Countries

• The size and appeal of the Indian market, being one of the largest global consumers, have been advantageous for India, as it provides Gulf suppliers with a stable and significant market for crude oil and natural gas.
• This has made India an attractive destination for Gulf investments in the energy sector, with major Gulf energy companies like Saudi Aramco and Emirati ADNOC making substantial long-term commitments.
• In 2023-24, for instance, out of the total $1.11 trillion in foreign trade, $208.48 billion came from the Gulf and West Asia region, accounting for 18.17 percent of India’s foreign trade. Notably, 14.28 percent of this trade was with the six GCC countries. The economic importance of the region has elevated its status in India’s Look West policy.
• In addition to trade in commodities and petroleum, the movement of Indian expatriates to GCC countries, their remittances back to India, and reciprocal investments are key aspects of the economic relationship.
• Official estimates suggest that around 8.5 to 9 million Indians live and work in the six GCC countries, making them the largest expatriate community in the region.
• These expatriates play a crucial role in making India the top recipient of remittances globally, contributing nearly 40-50 percent of the total remittances received by India over the years. In 2023, India received $125 billion in remittances.
• Furthermore, the exchange of investments between India and the Gulf region has increased significantly. As of March 2024, the UAE (seventh), Saudi Arabia (nineteenth), and Qatar (twenty-fourth) are among the top 25 sources of foreign direct investment (FDI) in India.
• The Department for Promotion of Industry and Internal Trade reports that from April 2000 to March 2024, the total FDI from GCC countries into India amounted to $24.09 billion

Image Source: Alamy

6. Bilateral Ties

 

• Indian investments and engagement in the GCC market have surged notably, with companies like Larsen & Toubro, Shapoorji-Pallonji, and Tata expanding their presence, while Indian enterprises such as the Lulu hypermarket chain are also making significant inroads into the GCC market.
• In addition to robust economic relations, the enhancement of bilateral political and strategic relationships, particularly since the early 2000s, has been pivotal in establishing the Gulf as a reliable partner for India.
• Under Prime Minister Narendra Modi’s leadership, bilateral relations with the UAE, Saudi Arabia, and Qatar have strengthened, aiding India in navigating challenges such as sanctions on major global oil and gas suppliers like Iran and Venezuela, regional conflicts from the Arab Spring (2010-12), and the global COVID-19 pandemic (2020-22).
• Energy security is crucial for any market and is especially vital for rapidly growing economies like India. It supports not only industrial development but also the power and transportation sectors, which are essential for economic growth.
• Given that the Gulf region holds some of the world's largest oil and gas reserves and is a leading producer and exporter of hydrocarbons, it has been instrumental in ensuring India's energy security through its strong economic, political, and strategic ties with India

 

 

For Prelims: Foreign Direct Investment (FDI), Gulf Corporation Council (GCC) For Mains: GS II - Significance of Gulf Countries and India's Energy Dependence

 

 

Source: Indianexpress