India’s response was immediate, structured and multi-dimensional and rested on three broad pillars.
India began 2026 on a strong economic footing. Growth was running at over 7.5%, inflation was below 3%, fiscal consolidation was under way, IPO fund-raising was robust, and consumption and services exports continued to support momentum. There were concerns around the currency and a flat stock market, partly because Indian equities had limited exposure to the global AI trade, but the broader economy was still moving with confidence, helped by continuing progress on trade agreements and investment sentiment.
Then came an energy shock that few countries had fully planned for. The conflict in West Asia and the closure of the Strait of Hormuz tested not only India’s fuel supply lines but also its ability to protect ordinary citizens from a global price and confidence shock. That is the part of the story that deserves to be told more fully.
AN UNANTICIPATED SHOCK
The Strait of Hormuz is the single most consequential chokepoint in the global energy system. India imports approximately 87% of its crude oil, around 50% of its natural gas and about 55% of its LPG. Before the conflict, 46% of India’s crude oil imports, 93% of its LPG and 55% of its LNG moved through that narrow waterway. When it closed, the risk was not theoretical. LPG supplies were down by nearly 30% at one point because of import cuts, India’s crude basket rose from about US$70 to US$120 a barrel, and the bigger danger was a potential loss of confidence among businesses and households.
It was not only India that was caught off guard. Several Asian economies found themselves exposed to the same chokepoint. Many IEA member countries had to release strategic reserves, allies activated bilateral supply swaps in haste. The blockade exposed over-reliance on a single chokepoint and an almost universal absence of pre-planned response playbooks.
INDIA’S RESPONSE
India’s response was immediate, structured and multidimensional. The PMO, Ministry of Petroleum and Natural Gas, other ministries, oil and gas PSUs and industry players worked in parallel across supply, production, demand management and fiscal coordination.
The response rested on three broad pillars.
FIRST, DEMAND MANAGEMENT PROTECTED HOUSEHOLDS
The first pillar was demand management. The immediate priority was to reduce pressure on imported LPG, give businesses clarity and protect households. The approach was tiered. Households with piped natural gas connections, CNG users and households without access to natural gas were placed in a no-cut category. Their supply was fully protected. Commercial offtake was reduced, and industrial and commercial LPG users were guided towards piped natural gas wherever infrastructure existed.
SECOND, SUPPLY WAS AUGMENTED
The second pillar was supply augmentation. A combination of regulatory action and diplomacy was deployed at the same time. The LPG Control Order directed refineries to work at full capacity and maximise LPG output from available crude. Domestic LPG production rose from 35,000 tonnes to 54,000 tonnes a day, a 50% increase, and refineries that had never produced LPG were reconfigured to do so. It was a system-wide repurposing of capacity during a live crisis.
Diplomacy also mattered. India moved cargoes out of the conflict zone through alternative corridors, accelerated diversification through additional imports from the United States, Russia, Nigeria, Norway and Canada, and secured passage for Indian vessels through bilateral engagement with Gulf partners, including naval escorts for Indian commercial shipping in the Gulf of Oman. India was actively managing its own position.
THIRD, FISCAL MANAGEMENT
The Government chose to absorb the price increase rather than pass it on fully to consumers. On 27 March 2026, the Centre reduced the special additional excise on petrol from Rs 13 to Rs 3, and on diesel from Rs 10 to nil. The revenue impact was about Rs 1.7 lakh crore and the price remained unchanged for two months.
Under recoveries of oil marketing companies were around Rs. 1,000 crore per day at the peak.
The under recovery of marketing companies is still Rs 650 crore per day after the 8% to 10% increase in prices of petroleum products. To put that in perspective, prices in the United States rose by over 40% during the same period, and many ASEAN economies saw increases exceeding 50%.
On the other hand, if the import-linked cost of a 14.2 kg cylinder rose above Rs 1,600, a regular household paid Rs 942 and an Ujjwala beneficiary paid Rs 642 after support. State and the oil marketing companies bore the gap.
WHAT COMES NEXT?
A crisis managed well should still be used to strengthen the future.
The first imperative is to accelerate the energy transition through greater adoption of renewables, EVs and hybrids. Every unit of renewable energy that replaces imported fossil fuel reduces India’s structural vulnerability. The Shanti Act provides a legislative foundation; what is now required is the speed and scale of implementation.
Second, India must maximise domestic exploration and production of petroleum. Its sedimentary basins remain significantly under-explored relative to geological potential. The approval of Rs 84,084 crore for basin-wide seismic surveys and AI-driven exploration in May 2026 is therefore important, but the test will be execution.
Third, strategic reserves must be enhanced. India entered the crisis with about 10 days of crude reserves and no dedicated LPG or LNG reserve. Given the scale of import dependence, these buffers are thin relative to global benchmarks. Larger reserves will not eliminate vulnerability, but they will buy time when markets seize up.
Fourth, India must continue diversifying supply sources across regions and lock in more long-term contracts to reduce dependence on volatile spot markets. Newer LNG and crude relationships with the United States, Nigeria, Angola, Norway, Canada and others should be deepened rather than treated as temporary crisis fixes.
Finally, India should maximise the use of domestic resources. The initiative to convert domestic coal to synthesis gas and substitute imports of LNG, urea and methanol, supported by incentive schemes totalling Rs 46,000 crore, is one such opportunity. Biofuels also need expansion because they reduce import dependence, support the farm economy and lower the emissions intensity of transport and industry. The blending programme has made real progress, and the next step is to look beyond 20% ethanol blending for petrol.
A CRISIS THAT DID NOT BECOME A HOUSEHOLD CRISIS
Indian Government and the Oil PSUs should be complimented for managing the crisis with discipline and pragmatism. At the same time, we must also not let a crisis go waste and should work towards making our energy sourcing more resilient and more reliant on domestic sources.
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Rajiv Memani is the Chairman and Regional Managing Partner of EY India and the Regional Managing Partner of the EY Africa India region. He is also the Chair of the EY Global Growth Markets Council. He served as the President of the Confederation of Indian Industry (CII) for 2025-26.
