The conflict in West Asia has once again exposed India’s vulnerability to securing its oil and gas supplies. As the world’s third-largest consumer of crude oil, India imports approximately 85% of its crude oil needs, and before the US-Iran war, 45% of those imports were through the Strait of Hormuz. When this strait was closed, the consequences were immediate.
The government’s rapid, multi-pronged response helped mitigate the worst immediate impacts, but also revealed how far India needs to go. The West Asian crisis has made clear that the energy transition in transportation is not just an environmental goal, but a national security imperative.
Bridging the gap
India quickly diversified its sources of crude oil imports from about 20 countries to 40 countries by the end of March 2026. Through this diversification, India can now obtain 70% of its crude oil imports from outside the Strait of Hormuz.
India is also trying to diversify its LNG imports, with nearly 52% of its import volume affected by force majeure due to the war. While traditional suppliers such as the United Arab Emirates, Saudi Arabia and Iraq remain important, the United States is also emerging as a major supplier of LNG.
In early March, the government directed refiners to maximize LPG production, increasing domestic LPG production by 25%. LPG supplies to households have been prioritized, while supplies for all non-domestic uses are being rationed. By reducing natural gas supplies to industrial and commercial consumers to 80% of their average consumption in March 2026, demand from these sectors is artificially reduced.
But despite the government’s assurances, panic buying has led to long queues at gas stations in many cities – a reminder that supply-side reforms alone cannot insulate India from external shocks.
India’s evolving transportation fuel strategy
India has been diversifying its transportation fuels since the early 2000s, moving from diesel to CNG, blending ethanol, experimenting with biodiesel, and expanding electric mobility. However, of the 378 million registered vehicles in India, more than 96% still run on petrol or diesel, and barely 1.3% of them run on electricity.
Supported by government mandates, ethanol-gasoline blends rose from 5% in 2019-2020 to nearly 20% in 2024-2025, five years ahead of schedule. This now replaces about 45 million barrels of imported oil annually – about 2.5% of total imports. However, ethanol production converts cropland from food crops such as oilseeds and legumes to sugarcane and water-intensive grains, and is much less land-efficient than solar energy: to match the annual travel distance of electric vehicles recharged from one hectare of solar energy, 187 hectares of corn-derived ethanol are needed. Higher blends also risk damaging engines of vehicles manufactured before 2021. Ethanol is a useful supplement, not a solution.
Compressed natural gas has helped transition fleets away from diesel fuel, but it is not a long-term solution. While CNG is cleaner than diesel, it still emits air pollutants and makes India dependent on natural gas imports. Continued investment in CNG-powered vehicles and infrastructure will expose India’s cities to air pollution for decades to come.
Green hydrogen shows promise in long-haul heavy trucking. As with the electricity used in battery-powered electric cars, green hydrogen can be produced from domestic renewable energy sources, leading to lower emissions and less reliance on imported oil. However, hydrogen applications in transportation are still in an experimental phase and have a long way to go until commercialization.
Battery-powered electric vehicles are emerging as an obvious choice
BEVs are the only transportation technology that is commercially ready and strategically sound. The technology is improving rapidly and becoming increasingly economical across urban, commercial and private use cases, and is suitable for vehicles ranging from two- and three-wheelers to passenger cars, light commercial vehicles and buses. More importantly, BEVs directly replace fuel imports and are powered by domestically produced electricity, exactly the insulation India lacked when the Strait of Hormuz was closed.
Union and state governments are already supporting the adoption of battery electric vehicles through incentives, tax breaks and mandates, with states such as Uttar Pradesh, Maharashtra and Karnataka leading sales. However, the share of battery electric vehicles in all new vehicle sales across most segments remains below 10%, with the exception of the three-wheeler segment, largely due to high upfront costs and inadequate charging infrastructure. Accelerating adoption will require three things:
First, continued policy support from both Union and State governments, including fiscal incentives, supply-side mandates, and fleet decarbonization targets. Such policies have shown a strong positive association with battery electric vehicle sales and adoption in the past.
Second, investment in battery electric vehicle manufacturing and charging infrastructure must accelerate sharply. Current investment lags behind the level required to achieve India’s 2030 electric mobility goals by 82%.
Third, and perhaps most important, India must localize its battery electric vehicle supply chains, from manufacturing of cars and their components, production of batteries and cells, to recycling, while securing access to critical minerals. Without this, India risks trading one form of import dependence for another.
India’s heavy dependence on imported oil and gas – much of it from the turbulent West Asia region – makes transportation electrification not a distant aspiration, but an urgent economic and strategic priority.
Source: Institute for Energy Economics and Financial Analysis
