New Delhi: When a trade war makes its way to the fuel pump, the ripple effects can be enormous. The recent 50 per cent tariff on Indian exports announced by US President Donald Trump is not just a headline about geopolitics — it could mean an additional $11 billion a year on India’s oil import bill.
For a country that imports nearly 90 per cent of its crude oil, the development has put energy security back in the spotlight. Aruna Sharma, Policy Advisor, Development Economist, and former Secretary Steel, Government of India told ETEnergyWorld that the episode is “a stark reminder of India’s persistent energy vulnerability to unpredictable diplomatic shifts and new global political alliances”.
India has called the tariffs “unjust, unfair, and unreasonable”, with Prime Minister Narendra Modi reaffirming the push towards energy self-reliance and maximising domestic production.
Why is India vulnerable?
India’s dependence on imported crude means global disruptions — whether political, economic, or security-related — can directly affect domestic fuel prices and supply. Consumption is projected to rise in the coming decades, making the import reliance an ongoing risk.
Sharma said that the country must “rapidly scale up domestic exploration and production” to reduce exposure to such shocks.
What policy changes are being suggested?
Extending contracts: Oil and gas fields under production sharing contracts (PSCs) nearing expiry risk losing investment unless terms are extended until the economic life of the field.
Aligning PSC and RSC terms: Granting PSC operators the same flexibility as revenue sharing contracts (RSCs) could prevent disputes and speed up project execution.
Streamlining operations: Self-certification could cut paperwork and accelerate execution by up to 12 months.
What about investment and taxation?
Capital-intensive deepwater and ultra-deepwater projects need foreign and private investment, but high taxes and royalties — which send 60–70 per cent of producer revenue back to the government — remain a deterrent.Sharma recommended targeted fiscal relief like royalty waivers, tax incentives for marginal fields, and support for enhanced oil recovery.
What about GST?
Bringing oil and gas under GST would let E&P companies claim input tax credits, lowering costs and improving project viability.
What is the key message?
Sharma added that the government should see the current crisis as a wake-up call and not allow its energy policy to be dictated by external pressure or global alliances. The country must double down on its domestic production ambitions, with urgency, clarity, and political will.
