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Journalism of Courage
— Md. Muddassir Quamar
(The Indian Express has launched a new series of articles for UPSC aspirants written by seasoned writers and erudite scholars on issues and concepts spanning History, Polity, International Relations, Art, Culture and Heritage, Environment, Geography, Science and Technology, and so on. Read and reflect with subject experts and boost your chance of cracking the much-coveted UPSC CSE. In the following article, Md. Muddassir Quamar, Associate Professor of Middle East studies at JNU, analyses the critical importance of the Gulf for India’s energy security.)
Today, India is the world’s third-largest energy consumer after China and the United States. According to the Statistical Review of World Energy, 2024, India’s total primary energy consumption was 39.02 exajoules, comprising 6.3 percent of total global energy consumption in 2023.
A seamless energy supply for industrial and domestic consumption is paramount for fast-growing economies such as India. This relates to energy security, which means a country has enough energy to meet domestic demands, and its energy infrastructure, including power systems, is secure from threats.
According to Energy Statistics India, 2024, prepared by the National Statistical Office under the Ministry of Statistics and Programme Implementation, India’s total primary energy production in 2022-23 was 19.55 exajoules and total consumption during the same period was 35.16 exajoule.
This means that about 68 per cent of the demands were met through domestic production, underlining significant external dependence.
Coal is India’s largest source of primary energy supply, comprising 58.12 per cent of the total in 2023. Despite significant domestic coal production at 16.75 exajoules in 2023, India has to source part of its coal demands externally, given the huge consumption at 21.98 exajoules in 2023.
Notably, this external dependence becomes starker when it comes to oil and gas, which, according to the National Institution for Transforming India or NITI Aayog, is the second largest source of primary energy supply in India at 35.44 per cent in 2023.
According to the Statistical Review of World Energy, 2024, India’s total oil consumption was 5.44 million barrels per day in 2023, while total oil production was 0.73 million barrels per day.
Similarly, natural gas consumption was 62.6 billion cubic metres, while natural gas production was only 31.6 billion cubic metres. This meant that most oil and gas are sourced externally, underlining India’s dependence on imports for its energy security, especially in meeting the oil and gas demands.
While this is significant for other sectors, the dependence of the crucial transportation sector on oil and gas means that India has to largely depend on petroleum imports to keep the transportation sector running. The question then arises as to where this critical supply of petroleum comes from.
Historically, the Persian Gulf states, namely the six Gulf Cooperation Council (GCC) countries—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates (UAE)—and Iran and Iraq have been the primary oil and gas suppliers to India contributing nearly 55-60 per cent of total oil and gas imports.
According to the Directorate General of Commercial Intelligence and Statistics of the Ministry of Commerce, in 2023-24, five of the Gulf countries, namely Iraq (second), Saudi Arabia (third), UAE (fourth), Qatar (seventh) and Kuwait (ninth), were among top ten petroleum suppliers to India while Russia (first), United States (fifth), Australia (sixth), Indonesia (eight) and Nigeria (tenth) were other five.
Notably, the Gulf countries have been among India’s top petroleum suppliers since the 1980s and have remained the most dependable suppliers despite the fluctuations in the international oil and gas market and supply chains.
In recent years, given the concerns about carbon emissions and volatility in the international oil and gas market, India has made deliberate efforts to diversify its sources of energy consumption and petroleum imports.
This has meant that the focus on clean and renewable sources has increased, and simultaneously, countries such as Russia, the United States, Australia and Nigeria have emerged as important sources.
Nonetheless, several factors contribute to the continued significance of the Gulf region, remaining critical to India’s energy security. The most important factors are its geographical proximity to India and the established buyer-seller networks. Further, the capacity and commitment of the Gulf states, such as Saudi Arabia, the UAE and Qatar, to supply oil and gas at special prices work in their favour.
This is important given the volatility in the international market, wherein strong political and economic relations, geopolitical factors, and transportation infrastructure play a critical role in ensuring seamless supplies.
Likewise, the attraction of the Indian market as one of the biggest global consumers has worked in India’s favour, given it provides Gulf suppliers with a stable and large market for crude oil and natural gas.
This has made India an attractive destination for Gulf investments in the energy sector, with mega Gulf energy corporations such as Saudi Aramco and Emirati ADNOC committing big long-term investments.
The strong diplomatic, political and economic relations between India and the Gulf countries have played an important role in the strong ties in the energy sector. The Gulf and West Asia region is among India’s largest economic partners.
In 2023-24, for example, of the total US$1.11 trillion foreign trade, US$208.48 billion came from the Gulf and West Asia region, comprising 18.17 percent of India’s foreign trade. Notably, 14.28 percent of this came from the six GCC countries. The region’s economic importance has accorded the Gulf region a special place in India’s Look West policy.
Besides commodity and petroleum trade, the flow of Indian expatriates to the GCC countries, the remittances they send back home, and the two-way flow of investments are important components of economic relations. According to official estimates, nearly 8.5 to 9 million Indians live and work in the six GCC countries and comprise the region’s largest expatriate community.
They have been instrumental in making India the largest remittance recipient country in the world, contributing nearly 40-50 per cent of the total remittances received by India over the years. In 2023, India received US$125 billion in remittances.
Additionally, the two-way flow of investments between India and the Gulf region has notably increased. Accordingly, UAE (seventh), Saudi Arabia (nineteenth) and Qatar (twenty-fourth) are among the top 25 sources of foreign direct investments (FDI) in India as of March 2024.
According to the Department for Promotion of Industry and Internal Trade, the total FDI from the GCC countries into India between April 2000 and March 2024 was US$24.09 billion.
Alternatively, Indian investments and participation in the GCC market have witnessed a sharp rise, with companies such as Larsen & Toubro, Shapoorji-Pallonji and Tata increasing their presence while Indian businesses, such as Lulu hypermarket chain, making their mark in the GCC market.
Besides the strong economic relations, the strengthening of bilateral political and strategic ties, especially since the early 2000s, has played a crucial role in making the Gulf a dependable partner.
The bilateral ties, especially with the UAE, Saudi Arabia and Qatar, have further flourished under Prime Minister Narendra Modi, and this has helped India overcome challenges due to sanctions on major global oil and gas suppliers such as Iran and Venezuela, impact of regional conflicts during and after the Arab Spring (2010-12), as well as during the global COVID-19 pandemic (2020-22).
Energy security plays an important role in any market and is critical for fast-growing big markets such as India. It is significant not only for industrial growth but also for power and transportation sectors that are critical for the functioning and growth of the economy.
The Gulf, which possesses one of the world’s largest oil and gas reserves and is among the largest producers and exporters of hydrocarbons, has played a critical role in ensuring India’s energy security based on the strong bilateral economic, political and strategic ties.
The strengthening of bilateral political and strategic ties has played a crucial role in making the Gulf the most dependable supplier of energy for India. Comment.
India’s energy security is the most important part of India’s economic progress. Critically evaluate India’s energy policy cooperation with the Gulf countries.
India has strengthened its political and economic ties with the Gulf countries. How can India utilise its strong ties to attract more investments?
(The author is an Associate Professor of Middle East studies at Jawaharlal Nehru University, New Delhi. Views are personal. @MuddassirQuamar.)
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