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This is part two of a series focusing on why India faced gas and oil shortages almost immediately as the US-Israel war on Iran began, leading to the closure of the Strait of Hormuz. Read part one here. 

By 2020, India’s energy targets had stopped making sense. 

Going by the National Democratic Alliance’s projections, India’s oil demand would double by 2030. In the same period, coal production would more than double and gas demand would almost treble. 

That was just the start. It also projected a five-fold rise in India’s renewable energy capacity by 2030; a 55% jump in hydel-power generation by 2030; and said all three-wheelers would go electric by 2023; all two-wheelers by 2025, and a third of all cars by 2030.

Thereafter, it also promised to treble India’s nuclear power capacity by 2032.

These targets left sectoral experts scratching their heads. Could India double its oil consumption while converting all two-wheelers, all three-wheelers, and a third of all four-wheelers to electric – not to mention road transport minister Nitin Gadkari’s ethanol push? How fast would India’s economy (already hit by demonetisation and the Goods and Services Tax) have to grow to absorb all this energy? 

Such contradictions were new. Under the United Progressive Alliance, documents like the Integrated Energy Policy set out the balance India needed to strike across fossil fuels, nuclear and renewables to meet diverse developmental objectives (high economic growth/low carbon emissions/energy independence). Under the National Democratic Alliance, however, that changed. “There is no comprehensive thinking in this government,” a former finance secretary had told me in 2020.“No one thinks 20 years ahead. Every ministry is pretty much working on its own.”

For anyone trying to understand India’s response to the energy crisis, this incoherence is a good starting point. It has saddled India with two major consequences. 

One, with the Modi government simultaneously backing fossil fuels and renewables, price – not policy – came to shape India’s energy transition. With that, as the third and fourth parts of this series will show, the country’s decarbonisation slowed.

Two, these bullish projections for oil, gas and coal demand turned India into the last big market for global fossil fuel majors. As they lobbied for market access, India got locked into imported fuels it didn’t even need.

Natural gas illustrates the second point to perfection.

An inordinate fondness for natural gas 

Until 2014, natural gas was a small part of India’s energy mix. One reason was scarcity. Between low domestic reserves and the imperative for self-reliance in fertilisers, India had granted the first right over domestic gas to fertiliser factories which needed gas for making urea. Only leftover gas went to other users like gas-based power projects and CGD (City Gas Distributors) networks.

Another reason was price. As a 2019 report by the Parliament’s Standing Committee on Energy said, to be competitive against coal-based power plants, gas-based power projects needed gas at no more than $5.5-6.0/MMBTU (metric million British thermal unit). Domestic gas cost between $4-$5.5/MMBTU but mostly went to fertiliser plants. Costing between $10-12/MMBTU, imported gas was too expensive.

This situation seemed unchanging. Domestic gas production was slowing. Dashing policymakers’ hopes, gas supplies from Reliance’s KGD6 basin had not materialised. Gas from India’s newer deepwater fields, like the East Coast Block, was expected to cost between $8/MMBTU-$9/MMBTU. On the whole, even as fossil fuel majors spun natural gas as a bridge fuel between oil and renewables, it seemed destined for a relatively small role in India’s energy mix.

Then came the Modi government’s decision to almost treble the share of natural gas in India’s energy mix – from 6.3% to 15%. 

“Growth in gas demand between 2012-2019 was -0.8%,” a Delhi-based energy researcher had told me in 2020. Now, to meet the government’s goal, gas consumption would have to grow at over 11% annually.

Its decision, however, went unscrutinised. With that, accompanying questions – what India would have to pay and why the Modi government was so keen on imported gas – went unexplored.

This was a mistake as the government’s experience with Tellurian shows, both expenditure and keenness were........

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