Fragmented and fitful: India’s energy diplomacy

Since the 1991 introduction of economic reforms that signalled the end of a highly regulated, socialist economic system, India has struggled to inject market reforms into its energy sector. This has not been an easy process and the recently elected Narendra Modi government is just the latest regime to announce ambitious plans for reform. There are numerous reasons for this having proved to be such an onerous task: natural resources are treated as government assets, energy regulation is divided between the federal and state governments, and the domination of inefficient state-owned enterprises has resulted in a sector shot through with corruption and political interests. Strong populist traditions also mean that there is an entrenched policy of fuel subsidies and energy price controls which has led to chronic underinvestment in power infrastructure and technology. Even where there has been considerable Indian private sector involvement, notably in natural gas, there has been a sense that policies are determined by influence-peddling. The degree to which these domestic policy issues overwhelm the debate on the Indian energy sector cannot be underestimated. New Delhi gives only fleeting consideration, normally just rhetorical, to the external aspect of its energy policies. Another reason why the country’s foreign policy and energy security do not overlap is that, barring the 1970s OPEC oil crises, no international energy rupture has shocked its political system sufficiently for it to integrate external policies with domestic energy reforms in a systematic manner. India’s external energy policy has therefore revolved around peripheral or transient issues. Attempts at energy diplomacy have been moved forward in fits and starts and are easily trumped by domestic political considerations.