Beyond Hormuz: India's Fractured Dependence Needs A Federal Energy Strategy
India’s heavy dependence on oil imports through the Strait of Hormuz exposes the economy to recurring geopolitical and energy security risks.
By Aparna Roy
Published : May 22, 2026 at 9:01 AM IST
|Updated : May 22, 2026 at 3:09 PM IST
The Strait of Hormuz has, once again, become a fault line for the global economy. Nearly a fifth of the world's oil passes through this narrow maritime corridor, making it one of the most critical and vulnerable arteries of global energy trade. As tensions around Iran escalate, markets have reacted with predictable anxiety: oil prices have surged, shipping risks have intensified, and supply chains are beginning to show signs of stress. For India, however, the implications go far beyond price volatility. They strike at the heart of a structural dependence that the country can no longer afford.
India imports close to 85–90% of its crude oil and over half of its natural gas requirements. A significant share of these imports- often estimated at 40–50%- transits through the Strait of Hormuz. This concentration of risk means that any disruption, even temporary, has immediate macroeconomic consequences.
A $10 increase in crude prices can widen India's current account deficit, stoke inflationary pressures, and constrain fiscal space. The early tremors of the ongoing Iran crisis, rising pump prices, concerns over LPG availability, and increased freight costs, offer a glimpse of how quickly global disruptions translate into domestic stress.
Yet, there is a deeper lesson embedded in this moment. Even if the Strait remains operational and supplies are rerouted- as they often are- the underlying vulnerability persists. India's energy system remains externally anchored in a world that is becoming increasingly fragmented, where geopolitics routinely intrudes into markets. The question, therefore, is not how India manages this crisis, but how it prepares for a future in which such crises are no longer exceptional.
The answer lies in reimagining energy security not as a function of imports and reserves alone, but as a distributed, domestic capability - one that is built as much in state capitals as in New Delhi. For decades, India's energy architecture has been shaped by centralised planning: large-scale imports, national grids, and federal policy frameworks.
This model delivered scale and efficiency in a relatively stable global order. But it is less suited to a world where disruptions are frequent and unpredictable. Energy security, in this context, must evolve from a centralised paradigm to a federal one, where states play a decisive role in producing, managing, and securing energy.
The first shift is conceptual but consequential: states must move from being passive consumers of energy to active producers. India's renewable energy story already offers a blueprint. Rajasthan, Gujarat, and Tamil Nadu together account for a substantial share of the country's solar and wind capacity, driven not just by national targets but by proactive state policies, land allocation, and industrial ecosystems. India’s installed non-fossil fuel capacity has crossed 50% of total capacity, but this transition is unevenly distributed and therein lies both a challenge and an opportunity.
In a world of geopolitical volatility, every unit of energy generated domestically reduces exposure to external shocks. States that accelerate renewable deployment are not just contributing to climate goals; they are building strategic buffers. The logic is straightforward: energy that is locally produced is less vulnerable to disruptions in distant chokepoints.
Expanding this model across more states while leveraging local resource endowments, whether solar in the west, wind in the south, or hydropower in the northeast, can create a network of regional energy hubs that collectively enhance national resilience.
But generation alone is not enough. The second shift must focus on continuity: ensuring that energy systems can withstand and absorb shocks. This is where storage and decentralisation become critical. Renewable energy, by its nature, is intermittent. Without adequate storage, it cannot fully substitute for fossil fuel-based baseload power.
India's current battery storage capacity remains limited, and pumped hydro projects are still in early stages of expansion. States must step in to bridge this gap by incentivising storage deployment, integrating it into renewable projects, and developing localised energy systems that can operate independently when required.
Decentralised energy systems such as microgrids, rooftop solar networks, and community- level storage offer an additional layer of resilience. They reduce dependence on centralised grids and long-distance transmission, both of which can be vulnerable during crises. More importantly, they bring energy security closer to the point of consumption. The disruptions triggered by the Iran crisis, particularly in LPG supply chains, highlight the fragility of centralised distribution systems. A more decentralised approach where households and communities have access to alternative energy sources can mitigate such risks.
The third, and perhaps most transformative, shift lies in integrating energy security into the broader development agenda of states. Energy demand is not an abstract variable; it is shaped by how cities are built, how industries operate, and how people live. Yet, energy security rarely features in urban planning, industrial policy, or social welfare programmes at the state level.
This disconnect is increasingly untenable. Urban India, which will house over 600 million people by 2030, is already a major driver of energy demand. The design of cities that include public transport systems, building codes, land use patterns will determine whether this demand becomes a source of vulnerability or resilience. Electrified public transport systems powered by local renewables, energy-efficient buildings with rooftop solar integration, and industrial clusters that adopt hybrid energy models can significantly reduce dependence on imported fuels.
States are uniquely positioned to drive this integration. They control key levers of policy from urban planning to electricity distribution and can align these with energy security objectives. For instance, expanding electric mobility at the state level not only reduces oil demand but also insulates transport systems from global price shocks. Similarly, promoting clean cooking alternatives can reduce reliance on imported LPG, a vulnerability that has become particularly evident in the current crisis.
The foundations of India’s energy security will not be laid in distant sea lanes, but in the policies and investments of its states. As India looks toward 2047, the goal must be to build an energy system that is not just cleaner, but also more secure one that is capable of withstanding the uncertainties of a fractured world.
(Disclaimer: The opinions expressed in this article are those of the writer. The facts and opinions expressed here do not reflect the views of ETV Bharat.)
